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Four steps to making money in speculative stocks

by , 12 August 2015

If you understand the risks, investing in more speculative shares like penny stocks can be very rewarding.

But before you do anything, you can't pick speculative stocks at random, you need to do your homework.

Read on to discover how you can make money in speculative stocks by following these four steps…

Investing in speculative stocks step #1: Ensure the stocks are suitable for you

By investing in speculative stocks, you take on more risk. So you need to ensure you understand this risk.

It’s a good idea to make sure you’ve invested in a solid long-term portfolio of shares before putting any money into speculative stocks, Marc Lichtenfeld in Investment U explains.

Once you’ve done this, you can look to invest in speculative stocks.

Investing in speculative stocks step #2: Keep an eye on it

Whatever your reason for investing in a speculative stock is, make sure this reason remains. Know exactly what your reasons are for buying and if the situation changes for the worse, sell.

Don’t hold on hoping the situation is going to change. You’re wasting your time and you could yield better results elsewhere.

Investing in speculative stocks #3: Use trailing stops

As the risks are higher with speculative stocks, make sure you don’t increase this risk by not using risk management techniques, such as trailing stop losses.

A trailing stop loss can stop a small loss becoming a big one. And a trailing stop loss will prevent your emotions interfering with your investment decisions.

Investing in speculative stocks #4: Let your winners run

If one of your speculative stocks starts to really perform, don’t grab your profits too quickly. By using a trailing stop you can also protect your gains.

If a share soars, you can always tighten up your trailing stop loss to protect your profits.

So there you have it. Four steps to making money in speculative stocks.

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Four steps to making money in speculative stocks
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