Investing in Penny stocks may be a very lucrative adventure for the wise investor. However, for the unwise sucker, it may be the worst nightmare. There are many different sources to obtain penny stock advice from. Many are not worth the money that you spend on their advice even if it is free. Knowing what advice to accept and which to run from takes a well trained eye. If you have not had at least one year of investing experience, I would suggest that you not attempt to invest in penny stocks. There are many other opportunities for you to make money while investing.

You should rarely accept advice from penny stock newsletter, websites and never from unsolicited e-mails. I remember the advice given to me when I was young. Don’t believe everything you read and only half of what you see. That is certainly good advice for obtaining penny stock advice. So how do you determine which is good advice?

Some pieces of advice in relation to reviewing penny stock advice is as follows:

If you happen to come across penny stock advice on the internet, then you should consider the source of where it is coming from. Take the time to do your own research to determine what is legitimate. Always trade from the legitimate stock exchanges such as NASDAQ or NYSE. You should stay away from over the counter or pink slips. These are the most risky form of investment. You have better things to do with your money.

Take the time to research the opportunities that are presented to you. There is stock picking advice on this website that you can review or you can review stock picking advice from other sources. Your stock broker is a good source. Verify any claims that are put forth. Many sites will put up their winners as evidence of their legitimacy. I have reviewed some I came across and their was no merit to their claims.

Always be skeptical. If it appears too good to be true, then it probably is. Always watch out for high pressure sales pitches. Whenever someone you do not know gives you a “hot tip” then you should ask yourself “why me?” What makes me so special that I was given this hot tip. Don’t fall for the “must act now” line. If you need to act now to take advantage of an opportunity, then it would be better to sit back and watch. There have been many times that I wish I had done that.

I am not saying that you may not make money with penny stocks, I am just saying that you should be careful. It has been said that a penny stock can go from $.05 to $.10 easier than a stock can go from $25.00 to $50.00. However, this is not true. A non-penny stock has so much more going for it. It has a legitimate product, Institutions, insiders and volume. It also probably has years of good financial results to back up its claims.

Buying penny stocks is kind of an exciting adventure. The stock prices are reasonable, and you can purchase a large quantity of stocks without a large investment. It also does not take a large jump in the stock price for you to make a lot of money. On the other hand, it does not take much of a fall for you to lose a lot of money. That is one of the problems with penny stocks. They are simply a very risky venture. However, if you are certain you want to find penny stocks to watch, here are some things to consider.

When creating your list of penny stocks to watch, make sure you are looking for stocks that have some value. Stocks which have stock prices of fractions of a penny are red flags. Please do not even consider these. Also look for those stocks which have some volume. The market cap should also be above 150 million dollars.

Take the time to do your own research into the stock list. Stay away from hot tips, newsletters and penny stock promotional sites. You do not know the motive of those people who are promoting these items. It probably is not your welfare. They are there to make money for themselves.

Be willing to do your own due diligence in creating your penny stock watch list. Begin with a stock filtering device and then take the time to do both financial and technical analysis. You should look at the book value, cash from operations, debt, stock price movement, the industry and products of the company. After you have done your financial due diligence, you can complete the technical analysis including moving average, candlestick, RSI, head and shoulders, double top and other types of analysis. I have written some additional tips on performing technical analysis on my website, www.mystocktradingtips.com.

Some stocks that I have recently found quite interesting in my stock filtering are:

AOB American Oriental Bioengineering
CNXT Conexant Systems, Inc
JOEZ Joes Jeans

You can practice your analytic skills on these three stocks. I do not own them and will not benefit at all if you decide to invest in them.

If you really want to invest in penny stocks, using a full service broker is another good idea. They can give you some advice on the stocks you pick out and you can learn from what they know. You need to realize that it is going to take some work to come up with your penny stocks to watch list.

You need to remember what Thomas Edison said about opportunity. He said, “Opportunity is missed my most people because it is dressed in overalls and looks like work”

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.

Penny stocks, by definition are stocks which are trading below $5.00 per share and which have a market capitalization below $200 million. The market capitalization is arrived at by multiplying the price of the stock by the number of outstanding shares. There are many different opinions on whether or not you can make money with penny stocks. Almost every opinion however, states that if you are going to try to make money with penny stocks that you should be extremely cautious and only use money you can afford to lose.

When investing in large cap or even small cap stocks, you have a legitimate history of how the price of the stock has done over time. You can do a pretty good job of evaluating both the technical and fundamental analytics of the stock. With penny stocks the technical and fundamental analytics may not be readily available. Some times the company is nothing more than a start up company with a dream. They are promoting themselves as the next Microsoft as soon as they get a viable product. You should definitely stay away from any company without any legitimate sales.

When trying to make money with penny stocks you should never invest in companies not listed on a major exchange. That means that you stay away from the pink sheets or over-the-counter stocks. You should also stay away from those stocks that come recommended by e-mails or some other promotional method. These are prime targets for pump and dump schemes. The company should also have at least 10 million is sales. This would indicate that it is a legitimate company that is capable of making a profit.

Compare the price per share against the book value per share. Only buy companies that have a very low multiple on their cash value and limit your stock purchases to five percent of your portfolio. That way you will truly be investing with money you could possibly lose.

Another tip is to investigate the amount of debt the company is carrying. You should only invest if the debt to equity ratio is low. An investigation of what the insiders are doing is another tip to consider. If they are dumping the stock, then that is a red flag for you.

If you are going to try to make money with penny stocks, you will need to do a lot more homework than with any other kind of investment. You are going to need to watch the stock by the hour and be willing to dump it at the first sign of trouble. Some advocates even suggest that in trading penny stocks that you need to become a day trader. If you are unable to do this, then investing in penny stocks is probably not for you.

It is possible to make money with penny stocks but the risk is high and the returns are unstable. There are probably more safe investments to make. However, if you are a person who thrives on risk and want to give it a try, then go for it. However, be aware of the risks and by all means do your homework. Be picky and maybe only choose one of a hundred stocks that look interesting.

Give your ideas some legitimacy by tracking a potential investment and see how you would have done. Then after you have traded several different stocks and feel you have a good trading system, then you are probably ready to try it with real money. Be careful and start with a small amount of cash. The ride may be fun and you even may make some money by investing in penny stocks.

If you are interested in making money with your stock investments, another posting to look at is http://mystocktradingtips.com/strategies-and-tips-for-stock-market-investing/.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.

When deciding what road to take in your investment strategy, it is important to know what kind of an investor you really are. Can you handle being a little aggressive or are you a more conservative investor. Do you get nervous if your investment goes down 2% or can you deal with a downturn of over 10%. This will help determine what avenue you choose to go down with your investments. My premise in these postings has always been that you should find good strong investments and stick with them. However, you may be the type of person who prefers a little adventure and that is alright. You just need to know what you are getting yourself into. I thought I was the aggressive type until I pretty much lost my entire portfolio by trading on margin. My attitude has changed somewhat now.

There are two methods you can use to pick the stocks you are going to use in your trading system. The first is where you pick the sector you wish to invest in and then choose strong stocks within that sector. Another approach is to look for strong companies in the stock market regardless of the industries they are in and after analyzing their financial data, choosing some to invest in.

One method of selecting companies to invest in is to track what the different company’s director’s are doing. If they are buying stocks in their own companies, the company may be worth looking into. The University of Exeter School of Business did a study of stock purchases by directors from 1986 – 2003 and found a pretty impressive track record of successful investing.

The best returns came from investing in value stocks, i.e. stocks which are undervalued. Returns were 20 percent higher in companies in small, undervalued companies when directors bought their own shares. Director’s trades in larger companies showed a 6% outperformance return. Of course, this strategy may not always work. For example, new directors often feel the need to purchase shares in the company they just became a director of. Even though there is no guarantee, this strategy is certainly one to look into.

After purchasing your stocks, be patient. Stocks will often double-peak. That is, they may dip down a little then surge upward. If you exit too soon, you may miss out on the best part of the ride.

Another tip is to avoid penny stocks. They simply are not worth the time. They are extremely volatile and you have to buy a large amount of shares to make it worth it. Also there is not the volume available in the stock to provide a safe return. I was involved with a company who bought a large amount of a penny stock. The price of the stock went up 300% but the trading volumes were so low, they could never sell. If they sold any kind of quantity, the price would tank. It was a tough position to be in. Here they were sitting on a potentially valuable stock and they could not get their money out of it.

Another strategy is to let your gains compound. If a stock is doing well, sell off some of it and get your initial investment out of it. That way, the remainder is all profit. You should also be willing to admit when you were wrong. Take your losses early if you have made a bad decision. You can then put that money in a winner and get the losses back.

In summary then, choose your strategy carefully. Decide what methods you will use to invest and then do it. As my grandmother told me once, nothing ventured, nothing gained. She wasn’t talking about stocks but it may fit.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.