1. Assessing the risk: - The longer you are in the trade, (you own the stock) the more the chance increases of a reversal in the share price. If you are in for Long Term than this is not so an important factor.
2. Time factors. Are the stocks for short, long term or medium term? This is crucial because it will save you time, effort and worry later on.
3. How many shares do you need to make it a viable financial proposition? Again in medium to long term again it is not so important.
4. The minimum amount you can buy on the ASX is $500.00 now an important factor to consider is that on average the brokerage for buying and selling will amount to $50.00. Now that is 10% profit that you have to make just to break even.
Therefore a 20% profit will gain you $100.00 less brokerage of $50.00 leaves you the sum of $50.00 profit.
We haven't taken into account capital gains yet. That you worry about when you are making a profit and not before.
Not much you say, and I agree with you. But if funds are limited as mine were to start with, you need 10 successful trades to make $500.00.
And do not think that is easy. I can tell you now that I averaged only around the 60% success rate to begin with in the first six months.
My knowledge was very meager, and only basic information could be found without having to pay for it. (A website like this one where detailed information is free were very hard to find.) And aren't you ?Lucky? that you found this website?
5. The next point to consider is movement. (Volatility) In other words how many shares are being traded on a daily/weekly average? You don't want to be buying a share that is hard to sell, particularly if the share price drops. Which on the odd occasion they are prone to do at times, without any prior warning.
6. If the share price is for a ?Blue Chip? say around $5.00 to $10 .00 then at $500.00 you will only get around 100 to 50 shares. Of course the lower price the share costs the higher amount of shares you get for your dollar.
Now a funny thing happens here as the price of the shares get cheaper the ?Risks Increase? This due to a larger increase in Volatility and the Volume of shares sold.
Blue chips maximum movement is usually around the 10% i.e. a $20.00 share will move around $2.00 (this also depends on market sentiment.) While a Green chip stock's price movement is usually in the 20% to 50 % range.
When you come to the lower priced stocks this includes your ?speculative? stocks. The higher volume is around the 50% to 100%
These are not hard and fast rules as there are other variables to consider i.e. is it a ?Bull or ?Bear? market? (Is it a buyer or a sellers market?) Large profits are made at this end of the market, but bear in mind the risks are equally great and can result in big losses for the unwary.
7. A most important tool used is a ?Stop Loss.? This is used to minimize your losses if a trade goes bad. (Downwards)
8. Discipline. This is done by doing ?YOUR? research (and not relying on so called ?Hot Tips?) this is done by employing either basic ?Fundamental Analysis? or ?Technical Analysis.?
The first is done by checking out the company itself.
Whilst the second is using past information in the form of using ?Charts? to help you towards making an educated decision. Prior to your share purchase.
I personally use a mixture of both. But what works for me might not work for you. What suits you best will only be found out by doing it and trial and error. I am continually ?honing? my skills and have learnt by making mistakes and then not repeating those mistakes again.
And yes! I still stuff up but not so often lately. But I don't think I know it all either, for I don't, so I am constantly learning on a Daily basis.
I hope this post has been of some assistance to you and improves your skills in picking ?Winning Shares.?
When people hear the term "Penny stocks" this refers to stocks of companies that are priced at incredibly low prices. There is high return possibilities, and the initial purchase can be very small, but you do stand the risk of the company becoming bankrupt and you dropping your money invested. The pull to these types of stocks due to the case that despite the risks there can also be huge payoffs.
Obviously, when you're attempting to choose a penny stock to put money in in you're going to need to know a few details about the organization. Just like purchasing other shares, you are going to need to understand the sort of business they are operating and what business plans they anticipate in the future.
One of the things that makes penny stocks so intriguing is the idea that most of the organizations offering them are rather uncomplex. A typical kind of penny stock is a mining organization that gains when the cost of the resource it extracts increases above a certain level. There are oil exploration shares that are valued in the same way.
As you may have already guessed, penny stocks are considered to be investments with high risk. The risks you take on with these stocks include inadequate reporting of financial issues, low trading volume and unfortunately even fraud.
The reporting guidelines on penny shares are not as rigid as they are for stocks listed on the national stock exchanges. One of the sorts of penny stocks is known as a "pink sheet" and has almost no regulation in regards to to their reporting and financial accounting standards.
Because there's very little or even no regulation or standards, this makes this sort of share open to fraud and manipulation. People posing as independent observers will use their influence to pump up penny stock prices, then they'll cash them in and delist the stock. This is a well known con referred to as pump and dump.
Don't let the above scare you off! Penny stocks have their risks but also have a large potential for a large profit. You can find plenty of real, honest small companies, and they have to get going somewhere. Tons of businesses that are listed as penny shares are headed to be successful in the future. Anyone who can spot out a winner will get a handsome profit.
It's important to keep in mind that choosing the right penny share will give you a big payoff.. Even if you lose on the majority of your penny stock picks, the single winner will return you such a large gain that you'll not remember about the ones that didn't return a gain.
Both Strudy & Sam Lockwood are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Strudy has sinced written about articles on various topics from Investing and Trading, Investing and Trading and Stock. Christopher Strudwick is a keen amateur share trader on the Australian Stock Market Visit his weblog for more free articles and useful information at http://www.asxnewbie.com. Strudy's top article generates over 18100 views. to your Favourites.
Sam Lockwood has sinced written about articles on various topics from Personal Desktop, Nintendo Games and Personal Desktop. to read about a penny stock trading system that you can use to start making money. It has an impressive track records and has been turning huge profits fo. Sam Lockwood's top article generates over 135000 views. to your Favourites.