There are very few investors who do not wish to generate a larger income from their activities on the stock market. Of course, the very nature of investing is that any potential for an increase in profits comes with significantly higher levels of risk. Usually, the more of a gamble you are willing to take, the greater the rewards are likely to be. In this article, we look at a few high risk, high reward strategies that, if handled intelligently, could make a huge difference to your profits.
Out of Hours Trading
While the US stock market officially opens at 9.30am and closes at 4pm ET, it is possible to begin trading out of hours from 8am or after hours between 4pm and 6pm. There are also platforms that permit trading sessions to take place as early as 1am. One particular risk of choosing to trade out of hours is that fewer investors will be active at this time, so the likelihood of success is often much lower.
However, avoiding the main operating hours of the stock market can enable you to react immediately to new developments, which means you could be among the first to snap up sought after shares. What’s more, certain traders may offer different opportunities or prices during their out of hours activities – something that those who only trade during regular opening hours may miss.
Listed on the FTSE AIM index, penny stocks have a share price below $5. They represent shares in smaller businesses of lower value – with a market cap of below $300 million. Knowing how to invest in penny stocks from Warrior Trading is a speculative activity, which makes it quite high risk. The rewards come when the businesses in which the trader has invested begin to grow or to generate significant income. This allows the value of your shares to multiply to potentially significant degrees. However, there is also a strong chance that the business in question will fail, or will never achieve any notable level of growth – at which point, you are likely to make a loss.
Trading Lottery Stocks
Lottery stocks are shares in a company that is currently struggling or trading at lower values, but that has the potential to reinvent itself or resolve its current issues. By investing in a business of this kind at a low point, when its shares are more affordable, you may be able to increase your stake and make a greater profit. However, the obvious risk is that the attempts made by the organization to get itself back into a pattern of growth may be unsuccessful, and the value of its stock may drop still further – leading to a significant loss on your part.
Trading Emerging Markets
You may be able to find untapped opportunities within emerging markets – that is, the stock markets of certain alternative territories. Popular examples include the Chinese, Indian, Brazilian, South African and Mexican markets. By investing here, you may be able to get in on the ground floor when it comes to market growth. This type of venture is usually a slow burner, as the returns will begin to become apparent following years of development. There are certain risks inherent in emerging market trading, as there are with almost any other type of investment that has the potential for high returns. In this case, traders are at the mercy of fluctuating exchange rates, regulations that are perhaps more relaxed and therefore easier to flout, and the potential for political corruption or uncertainty.
Approaches to High Risk, High Reward Trading
The trading and investing techniques explored above are best employed by more experienced traders who have developed their own tried and tested approaches over time. Here are some of the things you can do to prepare for high risk, high reward trading if you are taking the plunge for the first time.
Ensure You Have Enough Time
The most successful investors in high-risk areas are usually those who are able to commit to several hours of trading per day. If you aren’t able to keep a close eye on market developments, you may miss opportunities. For this reason, those who are fortunate enough to be able to trade full time often have greater success than those who approach investment as a secondary income on the side of their main employment.
Before taking on more risk, it’s a great idea to create a set trading schedule for yourself. When will your hours of business be? Will you trade out of hours? At peak times? Allow yourself to make adjustments if you find a more effective approach, but once you’re happy with your arrangement, try to stick to it as rigidly as possible.
Set Yourself Limits
It can be easy to fall down a rabbit hole when it comes to investing in stocks. If we fail to set boundaries for ourselves, we can become desensitized to risk and fixated with recouping losses or overly preoccupied with the possibility of greater and greater profits. To avoid this, it’s best to stick to strict budgets, respond only to carefully chosen indicators and stop at a predetermined time. We also highly recommend limiting yourself to specific markets or asset types – as this will allow you to specialize and develop in depth knowledge rather than spreading yourself too thin and wading into territories in which you have little to no experience.
Do Your Research
High reward investments are high risk, but not all offer large rewards. Before you start taking big gambles with your hard-earned income, it’s important to know exactly what you’re doing. Take your time to read up and seek advice on the characteristics of good opportunities.
Learn the techniques involved in high-risk investment within various markets and develop a strong understanding of patterns of growth. Certain trading apps and platforms will allow you to try out certain techniques by way of a dry run, allowing you to hone your skills and build your knowledge without taking on actual risk.