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Investing For the Long Term Versus Day Trading Penny Stocks – Which Method is Right For You?

The stock market is all about making money. There are tons of ways to do it, from short sells to call options. Many of these ways can seem a bit on the advanced side, and are really only viable plays because of the interest and trading volume on many stocks.
Penny stocks are a bit different. You might say they’re “old school”. With lower trading volumes the main way you make money is by buying low and selling high. Even so, there are still two different strategies you can use: Long term investing, and day trading penny stock.
Depending on your particular level of expertise, risk tolerance and amount of time you are willing to spend researching stocks, one may be more appealing to you than the other. Both are viable ways to make money.
Long term investing is fairly straightforward. Basically you want to find a company that you think is going to increase in value over the long term and buy shares (which represent part ownership) in that company. You will have to do some research up front to do this right (or have paid someone else to do this research for you) but what you are looking for is a company that is probably very young and has a solid business plan and a good management team.
You want to see positive cash flow into the company and for what history there is the company’s profits should be growing year to year, not shrinking or holding steady. When I say do this research yourself or pay someone to do it for you, I really mean that. Free stock tips, especially on penny stocks, are almost always a scamster trying to drive the price of his worthless stock up so he can dump it and leave his marks holding the bag.
Day Trading penny stock is a bit different than long term investing. First off, it requires far more research and secondly it is much less of an exact science. You can look at a company’s financials and other factors over five years and if what you see looks good you can be fairly confident the stock will go up in value, although you may not know when or how much.
Day trading is much more hit-and-miss, and involves following short term trends in stock price. Done well though, day trading can build a small investment into small fortune and a small fortune into a big one five times faster or more than standard value investments. When I say “or more” I really mean “a lot more” but I also want to counsel caution because day trading is a riskier business and can lose money quickly as well.
The idea in day trading is to figure out how short term news will affect stock prices in the short term. Deals with other companies, layoffs, all sorts of things can have sharp affects on stock prices in very short time frames and day traders seek to capitalize on those short term changes.
If a company isn’t really that financially solid and their stock currently goes for $0.88 and you had a time machine and could see next year their stock was worth $0.89 you would still have to buy so much stock just to overcome the stock trading commissions the company would absolutely not be a worthwhile investment.
But if there was some brief excitement because the company got a contract with Apple and Apple’s very trendy right now, that might have popped the stock price up to $0.96 in the span of a few days, before the stock slowly dropped down to $0.89 again. Buying right before those two days hit is a day trader’s ultimate goal, and it can be done. Just not easily, or all the time.
Greg Perkins is a fellow Stock Market Investor who provides information for those who would like to get started. For more great information on day trading penny stock [http://www.pennystockanswers.com/day-trading-penny-stock/], visit http://www.PennyStockAnswers.com



Tags: Investing, Method, Penny, Right, Stocks, Trading, Versus, Which




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