What To Do Before Trading Your First Penny Stock

Many penny stock enthusiasts want to jump right in and start trading before they get all of their ducks in a row. But there are a series of steps you should take before getting started that will make a big difference in the amount of success you have.

Have a Plan

The first thing you’ll want to do is make sure that you have a solid plan. Just dabbling in penny stocks rarely works out, and you should know exactly what you want to get out of penny stock trading before you go through with it.

Immerse Yourself In Penny Stocks

You’ll never know everything about penny stocks, but you’ll want to learn as much as you can until you feel confident enough to pull the trigger on a trade.  Much has been written about the theory behind successful trading, but you just can’t apply many of the tactics used with blue chip stocks to penny stocks. Penny stocks are a different animal and should be treated as such.

Make sure you’re learning specific strategies designed for penny stocks and focus heavily on it for several weeks so you’ll know enough to proceed.

Simulate Trades

You should get very familiar with a stock simulator before you trade actual stocks. Nowadays these simulators are so much like the real thing you can’t really tell the difference. This helps get the feeling that you’ve got the hang of it and when you make the switch to actual trading you’ll feel like you’ve been doing it for quite some time.

Free Up Some Capital

Above all else you don’t want to use the mortgage money to trade penny stocks. Make sure you free up enough capital to make the kinds of trades you want to make without feeling like everything will crumble if you lose it all. You want to bring a playful attitude to the game, and you can’t do that when you’re using money that you need to pay the bills.

Don’t be afraid to start small if you need to, it’s much better to start small and reinvest your winnings than to start with a larger amount and feel nervous about it. After you double your money a few times you’ll feel like you’re playing with house money and that’s exactly the kind of energy you want to bring to the table.

Choose a Good Brokerage

In the penny stock world it’s all about picking a brokerage site that has low transaction fees. Penny stocks are not a buy-and-hold type of stock so you could be making several orders each day and you don’t want to pay a bunch of fees in order to do so.

Timing is also a big factor here so you want to make sure that you choose a brokerage that can execute your trades quickly so that you can make the most while also losing the least if it starts to go down. A nice combination of low fees and fast execution is best.