Stock Play
Stock Play
Investing in Penny Stocks – Three Tips for Lowering Risk
Penny stocks offer investors the potential to make huge profits – as well as the potential to lose money quickly. These five tips will help you reduce your risk and make the right penny stock investments.
1. Focus on trading volumes
Look for companies with a consistently high volume of shares being traded as opposed to those with a high average volume. Average volume doesn't always tell the true story. If Company X trades 1.5 million shares today and then is inactive the rest of the week, the daily average will be 300,000 shares – but that doesn't necessarily equate to high volume. Also, pay attention to the number of trades per day – is trading activity being generated by one insider buying and selling? Consistent volume is the key to getting in and out of a penny stock play at an acceptable rate of return. Volume should be the first thing examined when considering a penny stock investment. If trading volumes are low it's likely you will only be able to sell your shares at the bid price – a disadvantageous position that increases selling pressure and results in an even lower sell price.
2. Go with the money makers
It's not unusual for a penny stock company to be unprofitable, but investing in such companies is risky business. You really need to know if the losses are manageable. If not, the company may have to acquire further financing – which would result in a dilution of your shares – or seek a joint partnership that benefits the other company. The best way to reduce your risk – and increase the chance of a higher return – is to invest in companies that are profitable, particularly those that use profits to grow their business and increase shareholder value. Finding these companies will require some research, but the lower risk and higher profit potential make the search worthwhile.
3. Keep informed with reputable penny stock newsletters
The majority of investors learn about penny stock opportunities through mail list newsletters. For every reputable and knowledgeable penny stock newsletter, there are just as many produced by unscrupulous company insiders and promoters playing the pump and dump game. So, how do you to determine the quality newsletters from the questionable ones? Subscribe to several and monitor their recommended investments. Look to see which ones offered subscribers legitimate investment opportunities and, most importantly, track which of their recommendations made money. It won't be long before you begin separating the good from the bad.
About the Author
Want to make a fortune trading penny stocks? I've been trading in penny stocks for last 10 years, and I think I can help you.
Many people like you are wanting to make a fortune trading penny stocks. What can really help you is:
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MybestPicksEver - Penny Stocks vs Big Board Stocks
Big boards, your typical holding period is more than a few weeks. A typical person will buy the stock as an investment for the future (with such hopes of making it big for them, or giving them a nice cushion to retire with).
With the big boards, you can just "set it and forget it". By this, I mean that you can just buy the stock and watch it grow. A great example of this is the story of Grace Groner. In 1935 she bought 3 shares (yes, THREE shares) of Abbott and never sold them. When she passed away this past January (2010), her estate was worth approximately $7M (yes, 7 MILLION DOLLARS). Groner worked as a secretary in 1931 at Abbott Laboratories and over the years, the shares split many times over causing the dividends to be reinvested. 7 decades later, the shares were worth over Seven Million Dollars.
Over the years prior to her death, she did sell the shares and took the money and donated it to various shelters and homes around her area, with the final monies going to a college near her home. But, the moral of this story is that you can buy some little stocks and let it fly for you (imagine what could have happened if you bought GOOG, AAPL, etc.)
With the big boards, typically, one will not be deemed a daytrader, unless you have a lot of money. Someone would need a good ‘chunk of change' in order to play regularly in the big board arena as most stocks are typically over $1.00
Within the Penny Stock Arena everything is completely different. Your holdings are typically hourly, and rarely overnight or weekly. A person who plays the penny stocks will typically hold for a short period of time to maximize on their profits or limit their losses.
Hould one follow the ‘set it and forget it' theory, then the company you are playing may not be there in a year. Typical penny stocks are shell companies and do not last long. There are the rare cases where the company is real and just had some bad luck (XM, GNVC, CBAI, etc.) but typical companies are shell companies.
When playing the pennies think and follow certain rules. Here are some typically to follow:
1) Which broker / trading company should I use? (we will go into some later)
2) How much will the broker / trading company cost me?
3) How fast is the broker / trading company in terms in of execution time?
4) How is the customer service?
5) Do they offer call in support?
6) Do they have a large restricted list?
7) What companies are promoting the stock now? (could be a P&D)
Remember:
· Never fall in love with a stock when trading pennies, as they will not love you back.
· A profit is a profit (whether it is 10% or 50%, money is money)
· Always set a stop limit / stop loss (protect your assets). You earned your money, mind as well protect it as well!
· Buy on rumor, sell on news. Typically a stock will do very well as the rumors fly, but once the news comes out, it is just ‘old' and is typically played out. So that is the time to sell to maximize on your profits
The Trend is your friend. This is a saying used by just about every promoter out there and trader. Follow the trend as the upward momentum will allow you to make more profits.
Happy Trading,
Chris
MyBestPicksEver offers stock newsletters on various stock plays of the day. MBPE offers news on top stocks, small cap penny stocks and other market movers alike. MBPE help investors in making the wise stock market investments. thus far thousands of our subscribers made huge gains using our daily penny stock alerts. join our FREE news letter Now Or Become a VIP MEMBER.. at http://www.mybestpicksever.com
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About the Author
A new revolutionary form of Penny Stock trading is here. Its called honest, up front information provided to you by MyBestPicksEver.Com. MyBestPicksEver.Com is a company brought up on integrity, honesty, and pure communication. We are here to provide the very Best picks ever , giving you information that you can only find here
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