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Welcome to the Penny Stocks Picker blog!
Trading Penny Stocks
Penny stocks are the race cars of the investment world, they move fast, are very exciting, and naturally carry a high risk/reward ratio.
To better understand penny stocks, it helps to know some basic terms such as technical analysis.
The term “technical analysis” or TA may sound complicated, but it is a very basic approach to investing. TA is the study of prices, with charts being the primary tool.
The human element
The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security’s price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of a major challenge in forecasting security prices, because they refer to human expectations. As we all know firsthand, humans are not easily quantifiable nor predictable. This fact alone will keep any mechanical trading system from working consistently.
Security prices are determined by money managers and home managers, students and strikers, doctors and dog catchers, lawyers and landscapers, and the wealthy and the wanting. This breadth of market participants guarantees an element of unpredictability and excitement.
IMPORTANT: Do not invest any more than you can afford to lose, penny stocks are the riskiest of equities.