However there is no general definition about penny stock, Stocks that sells below five dollar treated as penny stock. Some people consider the stock trading off of the major market / exchanges as a penny stock. A stock that is very illiquid and speculative of very small company can be also a penny stock. But these type of stocks are very popular in traders.
Why penny stocks are so popular? There might be two reasons:
1) These are low priced stocks and need les money to buy large number of shares.
2) These type of stocks generates huge profit with a small change in price. These stocks are very risky still these are popular because of possibility of huge profit. Here are steps to become a successful trader.
There are financial magazine where large financial data available which can be used to find a good trading opportunity. Other than magazine, television, internet is also a good source of financial data. Find a company that is in news; collect financial data and other news related to that company. Follow the company and update the changes and keep eye on any new development of the company. Whenever, the fundamentals of company changes often create an investing opportunity. So look the fundamentals of the company and if there is any investing opportunity?
What is crucial in investment is timing. Timing is even more important when it is penny stock as it is very risky and speculative in nature. When you discover a company that is providing a good investing opportunity, invest at right time. Right timing can be found with the help of technical analysis. There are various methods in technical analysis and used by the traders to find right time of buying or selling of particular stock. These methods or techniques are based on some technical tools or indicators. Applying these easy rules one can trade penny stocks easily. These rules are also helpful to the stocks other than penny stocks.
Besides this, Money management is what makes you a professional trader. Money management is the only thing that makes the difference between average trader and professional trader. It not the trading system that you are using but money management what is more important to make your trading career successful. Almost all beginners always forget or totally avoid money management rules . The simple way to manage your investment and reduce your investing or trading risk is spreading investment in number of stocks and not in any single stock.