Penny stocks allow investors to get a thousand shares. It is so because a number of penny stocks are out there for relatively cheap prices. If the company gets a big order for products, the stock could climb to almost a dollar in a matter of days. At the same time there are many investors who lose everything in their stock investing due to lack of proper planning. The following points can help you to become a good investor and earn much.

Have a plan

It’s good not only to have a specific method for selecting and entering trades, but also to have a plan for liquidating trades. Exit a trade whenever one of the following conditions is met: The expected catalyst fails to develop or the stock fails to respond as anticipated; or the penny stocks fails to respond within a predefined length of time.

Doing your own research

Before starting your investments, spend a lot of time reading and learning about investing and stock picking by visiting online financial resources and reading books, periodicals and other educational material. Read all of the relevant articles that you can, follow the headlines, watch the videos on financial networks, and devour investing books designed for the beginners. Discover where your friends get their information. If they have a broker that has made them a lot of money, ask for a referral. If they have their own strategy, ask them to teach you.

Invest With Small Amounts of Money

A lot of first time investors seem to forget this golden rule. The money you invest should not be the money you rely on to sustain your standard of living. Otherwise it will increase the pressure you’ll feel while you invest, and can’t protect your financial health for fear that you somehow lose every penny.

Invest with a small amount of money which is the best way to begin for the first time because it lets you get a feel for the stock market. Besides it also keeps you safe from any major losses. There is little risk for loss with a small amount invested, but your potential knowledge and experience gained is unlimited.

Create a fake portfolio

Places like Google and Yahoo have sections that let you to track your investment portfolio. If you are interested to own individual penny stocks, and then you must make researching your penny stocks repeatedly. You should have some knowledge about what can affect your penny stocks before any news hits or anything happens. Don’t go for investment your real money until you’re comfortable about making money by your practice portfolio.

Foresight

A good penny stocks picker can think ahead. They can assess and foresee the next gadget that people can’t live without or the next emerging market only a few years away from being a world top financial system.

Dispose of your credit card debt

It is very important to first retire or control the debt before beginning to invest in serious. It is good if you had no debt at all. For many people, being able to chuck out debt absolutely is just not practical. If you have credit card debt, you may be a sufferer, because of the high interest rates on credit cards and the relatively small amount of money investment as a new investor, credit card interest will easily destroy your gains. If your annual interest rate on your cards is 15%, there is a very high degree of possibility that your new portfolio isn’t going to make 15%.

Statistics show that the average American has $5,000 in credit card debt. If this describes you, you’ll probably be unable to afford investing in penny stocks while you manage your debt.

Not Trading too much

Never let fees and taxes dictate your trading moves. If you have to change your position, do it. But don't ignore fees and taxes, and don't get trade happy.