Being a newbie to penny stock trading, you should be aware of the fact that there are mistakes that are easy to make but that will also be devastating to your success as a trader.
What are the most dangerous of these mistakes? Let’s find out.
Here are four more dangerous mistakes when trading penny stocks for the first time investors:
Dangerous Mistake #1: You Go All In On Your First Investment
Not only should you never go all in on your first investment, you should never go all in with any investment, period. This doesn’t just apply to penny stocks. It also applies to what are normally called ‘safer investments’ such as bonds or commodity futures.
Contrary to what you may believe, penny stock trading is not a get rich quick scheme. Going all in on an investment and expecting to make it big is a false expectation. Diversification and taking things slow and steady are the keys to winning with penny stocks.
Dangerous Mistake #2: You Don’t Find A Mentor
A mentor who is very experienced in penny stock trading and has learned from his or her own mistakes will be very beneficial to you as a beginner. You simply need someone to guide you along and to learn from.
Take note that just because there is no mentor in your area or you can’t afford one doesn’t mean you shouldn’t have one. One idea would be to follow the blogs and YouTube channels of professional penny stock traders.
Even if you don’t actually communicate with them back-and-forth, listening to their advice and following them as if they were your mentors will be very helpful.
Dangerous Mistake #3: You Proceed Too Cautiously
One of the most dangerous mistakes in penny stock trading is to be too aggressive and going all in on an investment, but another mistake that can prove to be just as costly is being too cautious.
Penny stock trading is risky, so naturally you must be willing to take risks. It’s difficult it do, especially if you’re someone who likes to play things safe, but eventually you will have to bite the bullet and invest in a penny stock if this is something you want to do.
Dangerous Mistake #4: You Follow Millionaire Success Stories
There are countless stories of people who turned a few thousand dollars into a few million through penny stock trading. Avoid following these stories at all costs because they give you unrealistic expectations of what penny stock trading is really like. A large portion of these marketed stories are not even entirely true to begin with.
As an alternative, keep your expectations within reason. Making a 5-10% gain on a trade is perfectly doable even if it may not seem like much. Furthermore, focus on trading whichever penny stocks are currently seeing the biggest earnings growth in the market.
Avoiding Trading Mistakes
As a first time investor in the penny stock market it can be super easy to make mistakes that result in you sustaining large losses. Penny stock trading certainly isn’t for everyone, but if you firmly decide to commit to it and are aware of these mistakes so you can avoid them, you’ll do just fine.