Penny Stocks

March 30th, 2010 by admin Leave a reply »

Penny Stocks are a very interesting investment. Many traders consider these types of stocks to be a little risky. A lot of traders avoid penny stocks whenever possible or completely. However, there is an opportunity to make a very large return, you just need to know what to look for.

Penny Stocks are any share trading under 5.00 but when i’m trading penny stocks I look for them to be under 2.00. Look for a company that is growing and new, with a minimal trading history. All penny stocks are trading this low due to tough financial issues and difficulties. Instead of investing in the struggling companies you could choose to invest in new and growing companies. Focusing on these types of companies allows you to minimize distraction and focus on companies that have the potential to become huge.

How do you find companies to buy?

Find the company your interested in by meeting the above criteria, then take a look into the industry. Is the industry growing, is it predicting to be hot over the next 10 years? How is the competition in the industry for the product or idea being marketed? Take a look at the industry as a whole and whether or not this companies product is worthy of your investment.

If everything is solid, then dig deeper into the company to find out more information about their operation. Find businesses that are different from others look for something that stands out with this company. Maybe they have a better product, better price or a more streamlined and financially sound company. Original products that you would be willing to buy are often signs of an interesting investment.

When you take a look at the companies financial situation there are many things to look for. These are penny stocks, you will find them with negative income and in debt. This is natural, often these companies are just beginning and it takes money to make money. This is often the situation with new companies. When your company is in this situation, look for them to have a line of credit available or some other source of funding.

Finally, look for a stock of a company that maintains strong communications with shareholders. When you can read periodic updates from the business, either on a website or some type of newsletter, you can keep up with exactly what is happening within the organization.

When you begin buying penny stocks you will find yourself making huge gains (addictive) and taking some losses. Ensure you can look back to find out what you missed on the bad trades. Learn from your mistakes and try to limit these losses in the future.

Use the penny stock tips you find on our penny stock forum and the hot penny stock picks that are randomly placed upon this blog.

Please share with other stock traders!
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1 comment

  1. Almost all of the stocks are a little risky. You are right when you say to invest on new and growing companies but it needs to be check if the company will be staying on the business for a long time. Post like this is very informative to all and a big help too. Keep on posting.