How much money to put into a penny stock?
This is a common question amongst beginners.
These two things should be taken into consideration:
Portfolio amount = (your cash balance)
Volume traded = (stock $ dollar amount )
Volume dollar amount= (stock price x volume)
A few questions you must ask yourself:
Is this a day-trade or swing trade?
Is this a company I am willing to invest in?
Read our other blog update (Understanding stock percentages) to get a grasp on determining if the stock can actually move your desired percentage gain.
Stocks under .01, the average minimum trade is $300-$500.
Stocks .01-.99 can range from $300 - $5,000 average trade.
Stocks ranging from $1.00-$5.00 can see a minimum of $500 to an upward $20,000 average trade
Keep in mind liquidity is an underlying factor in how much money you are willing to risk.
If a stock has news, momentum, and/or hype with large cash volume of $100,000 (which is decent for a sub-penny), you can risk a larger amount versus a stock with only $20,000 tota cash volume.
Most beginners normally risks a minimum of $300. If you are trading with less than this then you should consider paper trading until you are comfortable with more money or you may lose all you have before making any money,
As you understand how stocks move and realize they are manipulated by market makers and other traders, you will get more of a feel of how to risk $1,000+ without losing more than... Login To Read More