If you are trying to learn the basics of stock market investing, you might want to try penny stocks. It’s a much cheaper option than learning how to trade with the big boys. Its really the same principles involved if you were trading a powerhouse like Wal-mart or a small cap stock. It all boils down to understanding the markets and what makes it move.
Learn all about the fundamentals. You can look on any financial websites and pull up the key financial statements of any publicly traded company. You’ll be looking at the same relevant data with a penny stock as you would for Microsoft. Look at income statements and see if profits have been increasing or decreasing every quarter. Take a peek at their balance sheet and see if the company is taking in more debt than they can handle.
Understand how to read charts. Most cheap stocks that take off on the upside always have signs that can lead to the up move. Look at the stocks volume. If there is enough trading volume and the stock is knocking on the door of a major resistance point, make sure to keep your eye on it. It might be ready to explode.
Another thing to keep a close tab on is news. News can move a small cap stock a lot more than the large cap stocks. All you need to do is look at any small company that comes up with an incredible idea that drives the marketplace crazy. The next thing you hear they are all over The Wall Street Journal.