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If you have decided that you’d like to get involved in the world of trading penny stocks, then there are many different critical aspects to it that you need to learn first. The decisions you make regarding your trades from day to day should be made from experience, not on a whim. The intelligent trader knows that trading penny stocks is not the most stable method of trading, in fact it can be quite risky. However with the right knowledge and experience, you will be able to minimize that risk significantly.

There is a basic deficiency in trading psychology, and this unfortunately can be found present in beginner traders as well as some experienced traders. This basic deficiency if often found in the area of “greed control”… yes most traders are unable to control their own greed and this leads inevitably to their own downfall. Are you one of them?

Penny stocks are one of the high-risk investments vehicles available in the stock market. These stocks are sold below $5 per share. These stocks are also commonly known as little cap stocks or micro cap stocks. This isn’t the fave of smart financiers and long term investors due to the risk factors and the volatility concerned.

All those who need to enter into stock trading should first spend a while in learning the fundamentals of market. Only when you know how stock exchange operates you’ll be ready to make sound investing choices. There are three kinds of stock trading and they are day trading, position trading and swing trading. You can opt to invest your money in stocks in short term or long term basis.

When it comes to tracking down the perfect penny stock listing, there are two schools of thought that come into play. The first relies on hunches and the proverbial hot stock tip from someone we trust; the second relies on news and hard data to figure out which penny stock has the best chance of moving up the ladder. Needless to say, method two often out performs method one, but it relies on patience and the ability to withstand the occasional market hiccup.

Selling covered calls is always a great strategy, but it becomes even more important when the markets are volatile like they are today. For all those who don’t know what a covered call is, it is a strategy where you buy a stock and sell call options on it. These call options allow you to collect monthly premium on your stock, however you are obligated to sell your stock if it reaches a certain level.

Penny stocks are company share offerings available to share investors by organizations that are simply too tiny or new to have a listing with the dominant stock exchanges. They have significant return potential, and the initial purchase can be rather small, but you do stand the risk of the business becoming shut down and you losing your money.

There are many different tips and tricks you will want to know when going into the world of trading penny stocks. Trading these types of stocks can be very financially risky, although you still have the potential to see great returns quick. You will always want to make sure that you have the proper amount of money in your account to cover the share and of course for the broker’s commission as well.

The first thing you should know before you get involved in trading penny stocks is that it is a highly risky business. This is because the companies you are investing in are going through very financially hard times. Many of these companies are close to declaring bankruptcy. Even though these stocks are extremely inexpensive, their value can fluctuate wildly, usually decreasing, but in some cases they do rise.

The Net Asset Value (or “NAV”) of a company is the residual interest in its assets where all its liabilities have been deducted. In other words, the NAV is the company’s equity and is viewed as a buffer against which the company’s market cap should rarely drop below. “NAV” or “Shareholder Equity / Number of Shares” = “NAV per Share” and should serve as a rough benchmark below which a good company’s share price should not trade.