Ev’s Corner: Finding Gold in Penny Stocks by Short Selling
Phoenix, Arizona. [Uptick Newswire August 2, 2016]- There’s more to investing than buying low and selling high. In fact, you can do the opposite. Rather than waiting for a stock to increase, you can also wait for it to decrease.
As an investor, research is everything. Whether it’s regarding management or revenues, company information can push a stock up or hold a stock down. Rather than spending relentless hours digging for information on several different stocks, the first thing you should do is sign up for as many top free penny newsletters as you can and let the information come to you.
After you familiarize yourself with several companies, the next step is to keep on eye on the prices of those stocks. When you see a stock go up 40–100%, and you just don’t think it will stay at that high price because you know from the newsletters that the company doesn’t generate revenues, that’s when you want to come in and short sell.
What is short selling? It’s when a broker lends you shares to sell to the open market with a promise that you will buy them back within a certain amount of time. You’re basically looking at a stock that you think is way over-priced and you sell that stock into the market with the intention of, hopefully, buying it back at a cheaper price, and then you make the difference in profit.
For example, let’s say ABC stock just rocketed up from 1 dollar to 15 dollars. That price is most likely over-valued so you ask a broker to lend you 100 shares of that stock. You sell that to the market at 15 dollars and now you have $1500 in your account. But remember, you still owe the broker 100 shares, so you still have to keep an eye on that stock.
A month later, the price of the stock drops down to 5 dollars. Using the $1500 in your account, you purchase 100 shares of the stock at the now-low price for a total of $500 dollars. You give the broker back their 100 shares, and guess what? You keep the remainder $1000 dollars in profit.
Short selling is just one of many different approaches you can learn to achieve success in the penny stock market, and like anything else in the world, it involves time and commitment.
Here’s a bonus Ev-Tip: set a goal for yourself. Go into a short sell with an exact percentage you want to hit. Once you hit that percentage, cash out because not only did you hit your goal, but you also made a profit. It’s a win-win.
Source: Uptick Newswire