What are Penny stocks? 

Penny shares or penny stocks are common stocks that trade for less than GBP 1 on UK stock exchanges or less than $5 on US stock exchanges. The low share price implies the stock is possibly a highly speculative investment.

Notwithstanding the definition of a penny stock being valued less than GBP 1 or $1, they have been spread to cover stocks valued over guideline prices. However, penny stocks have low share prices. They have very high volatility and are seen as high-risk stocks, with potential for major growth. Do due diligence before doing penny stock trading. They also have a market capitalisation of less than GBP 100m in the UK. Penny stocks in that country are listed on the FTSE AIM (Alternative Investment Market).

The attractiveness of trading penny shares and penny stocks is obvious. In case you have GBP 1000 to invest, you get a considerably larger share percentage in a smaller company whose shares are trading for a few pence, instead of buying blue-chip shares that are costly for a tiny ownership percentage.

In the event of your penny stocks one day becoming blue chip, you could end up making large returns with the appropriate trading strategy.

Trading penny stocks in the UK

• Open a live trading account. Download the PrimeFin trading app.
• Fund your account. Add funds thru bank card, bank transfer, or PayPal, to your account.
• Research to find the right stocks for you. Use the news and insight tools, review our news and analysis section to guide your trading efforts.
• Make up your mind if you decide to buy or sell.
• Decide upon your entry or exit points based on your trading strategy. Go long and buy if you think the instrument price will appreciate. Conversely, you may go short and sell if you think the price will plummet.
• Risk management – prior to placid your trade, ascertain that you have followed risk management guidelines per your strategy.
• Determine the position size and place the trade.
• Apply any risk management orders, like stop losses and take profits, and confirm the trade.
  Monitor your position and close your trade.
• In case making a profit on their penny stock position, some traders may like to stick to their trading plan, closing out when their target price is attained.

Penny share market analysis
Penny stocks are famous for being extremely volatile. Price fluctuations close to 20% are common. Hence, it is necessary to conduct a detailed analysis while pursuing your risk management strategy prior to deciding if or not to go forward with any trading decision. It is also best practice to trade in industries where there is large market growth relative to declining industries.
Penny stocks tend not to see much stock market daily trading volume. In the case of plenty of people talking about a penny share , the share price could be thus influenced too. Make it a point not to get attracted to investment only because it has a large one day move and you are afraid of missing out. What goes up can swiftly plummet. Be sure of your own reasons for investing.

Entering and exiting a position
If you are happy with your research and made your trade, you may like to sell. For instance, let’s say you are lucky and the value of penny stocks movement is in your preferred direction. Suppose it doubles. You ought to have a strategy for the instances when it does not happen.
When smaller shares experience changes in market sentiment, the price can do a volte-face very quickly. Getting into the trade is only half the job done. Arguably, however, exiting is even more crucial.

Trading on penny stocks – your location
PrimeFin invites you to trade penny stocks with them. With CFD trading and spread betting, you may access and trade your preferred financial instruments globally on one streamlined trading platform.