Guidelines for Beginner Penny Stock Traders

For many beginner investors, the first logical stop is penny stocks. As the name suggests, penny stocks are companies that trade with a low share price, often less than $1 (usually small companies). They might be new, they might be in an up-and-coming sector, or they might even be in danger of going out of business.

The problem is their high volatility, but if you're disciplined, there's no need to be scared. I'm going to give you some pieces of advice I believe in.

Firstly, only invest in penny stocks with "risk money" or those funds you can afford to lose. You also should only dip your feet into the waters of low-priced shares once you've gained reasonable knowledge.

Most investors make the mistake of investing their money in whatever is the latest "hot industry." The problem is that by the time you hear about which industry is hot, it typically means that it is on everyone else's radar by that point. The trade is already crowded, matured, and heavily overpriced. Firstly, research what industry you want to focus on, and then thoroughly research the company you want to invest in.

Even if their stock price goes up, don't beat yourself up - 95% of the time it's a bubble that pops.

My best advice that I can give you is to start practicing on your own using paper trading. It's literally risk-free, fake money trading, meaning this is the place to test out your penny stock trading strategies and tactics, and most importantly, don't invest your beloved life savings!