This is a detailed guide on how To Trade And Make Money From Penny Stocks In Nigeria.
Do you want to become a penny stock investor?
And you want to make sure you don’t take the wrong step in investing?
I bring you good news.
In this post, I will show you how to trade and make money from penny stock in Nigeria.
Penny stock is very open and you have the potential of making a lot of money as an investor.
I will give you the key that will open to you abundant financial success.
The capital market can hurt you if you don’t know your onions, but it can also enrich you if you know the right plug to pull.
And the way is what I’m about to show you.
Let’s get started!!!
The Concept of Stock
I will say a stock is an investment that represents the ownership of a part or a fraction of a corporation.
When you buy a stock in a corporation, you become a stock owner, and you are entitled to a part of the corporation’s assets.
You are also entitled to a profit that’s equal to your investment.
Stocks are sometimes called equities.
And units of stock are called “shares.”
With a foundational knowledge of what a stock is, we shall discuss penny stocks, which is a subset of stock as a whole.
Generally, Penny stocks are shares or equities that have very low prices.
When we don’t talk of penny stocks, then the other type of stock to talk about is the capitalized stock which costs more in terms of investment.
Who Should Invest In Penny Stocks?
Well, If you ask this question from any penny stockbroker in Nigeria, they will outrightly tell you that penny stock is for everyone who wants to make money. In fact, good money.
I will echo the same thought too.
Penny stock is for everyone who wants to make money from investments.
Although, penny stocks are usually preferred by investors with small or average investment budgets.
Because you will need to put a little sum into the investment.
But trust me the rewards awaiting you is in folds.
Why you should invest in Penny Stocks
Wait a minute!
Can you make money on penny stocks?
That’s the first reason you should consider.
I wouldn’t be writing this article if not for the fact that you can make money by investing in it.
Another reason why you should consider penny stocks is because the prices at which they are sold are affordable.
You don’t need to be stressed about how much money you would need to start trading penny stocks.
All you would need isn’t much.
How To Invest In Penny Stocks
The peculiarity of penny stocks does not in any way influence the process of investing in them.
The process is very much like investing in the capitalized stock.
No stress attached!
You can invest in Penny stock by following the outlined process below:
1. Visit a penny stockbroker
The first step to take is to visit a stockbroker.
A stockbroker is a professional, who buys and sells stock on behalf of clients.
They serve as middlemen between two parties – the seller and the buyer.
2. Open a Brokerage account
When you visit a stockbroker, you will then open a Central Security Clearing System (CSCS) account.
This is required because purchasing penny stocks will be done through this account by your stockbroker.
This type of account is also called a brokerage account.
You would be given an account number and you would be required to Fund the account for effective running.
These are the requirements needed for opening a brokerage account:
- Account opening form
- Two passport photographs of you.
- A utility bill (not more than 3months old).
3. Fund Your Account.
At the completion of the account, you will credit your account to facilitate trading.
How To Trade And Make Money From Penny Stocks In Nigeria
The fact I have established about penny stock being able to fetch you good capital does not take away its risks totally.
So you can trade penny stocks and fail to make money.
In fact, you can even lose money if things are not done in the right way.
Therefore to trade penny stocks and make more money, you can consider the following:
1. Study The Market Trends
Studying the market trends will help you know how stocks behave in the market.
And with that, you will know how well to respond as an investor.
2. Understand The Technicality Of Stock Trading
Learning and understanding the technical and fundamental analysis of stock trading and investment is another way to master the art of trading penny stocks.
You can learn this from stock trading classes and also from your broker.
It is essential to make background research before buying a stock.
If workers of a certain corporation are shying away from a particular stick you want to trade, you should beware of it.
Therefore make expansive research before buying.
4. Limit Holdings And Learn To Diversify
You need not hold on too long to a stock.
You should limit your holdings in stock to about 1 to 2 percent of your total stock portfolio.
This is necessary because it is a very good way to control your trading and reduce your losses.
Also, learn to diversify your penny stock portfolio.
Spread your investment around to reduce the risk of losses.
I will recommend that your investment in a particular asset should be about 5 to 10 percent of your total portfolio.
Remember, your goal is to trade penny stocks and make more money.
5. Check liquidity and trading volumes
Liquidity here is also the marketability of your stock.
If you have already invested in a penny stock and have seen it become successful, then you will certainly turn your profit into cash by selling your shares.
Hence, you need to have adequate liquidity and trading volumes to enable you to trade efficiently.
You can measure liquidity by share turnover.
And this can be calculated simply by dividing the total number of shares that have been traded over a given period of time by the average number of shares outstanding for that same period of time.
6. Know The Right Time To Sell
When you trade penny stocks, the normalcy is to trade over a short period of time.
Therefore, for you to trade penny stocks and make more money, you should know the right time to sell your penny stocks.
You will most likely not see a penny stock that is a long-term buy-and-hold investment.
penny stocks are usually for the short term.
And that is why you can’t buy and hold for too long.
It is therefore advisable to consider a relatively sizeable profit over a period of time.
Waiting for a too bigger profit margin may not be realistic with penny stocks.
Take Advice From Your Broker
If you are new to penny stock trading, it will do you a lot of good to be guided by your broker.
Brokers can help you in which stock to buy and which to avoid till your experience will also become vast.
Carefully Choose Your Broker
Again, the aim is to trade penny stocks and make more money.
Your broker will influence your chances greatly.
Therefore, consider the following factors before you settle for a particular broker
- Transaction charges
- Minimum Brokerage per share
- Minimum Brokerage per order charges
- Trading frequency
- Brokerage account maintenance charge
- Withdrawal charges
Gather Information For Investment Analysis Daily
Some of the sources where you can get this information includes:
- Central Bank of Nigeria
- Stockbroking firms and financial institutions
- Nigerian stock exchange publications
- Audit and accounting firms
- The internet
- Business papers and magazines
- Books and manuals
- Conferences and seminars
That will be all on how to trade and make money from penny stocks in Nigeria.
Hope this was helpful.