Penny Stock Investing has many definitions depending on the source. Generally speaking, penny stocks are defined as any stock that is trading under the price of $5.00 per share and that is traded either on pink sheets or on the NASDAQ. Stockbrokers define them as any stock that trades below $5 per share and regulatory agencies generally define them as any stock with a price below $2. Never the less, when penny stock investing, an investor can make, and then lose money very quickly considering how easily a change by even .05 cents can relate to the overall value of a stock. This factor is what makes choosing a good quality penny stock with a high potential for return on investment very important.
Tips and General Information Regarding Penny Stock Investing
1) You must create your own personal list of 10-20 penny stocks with those stocks that you think have the most potential. This will enable you to manage and monitor your penny stock portfolio.
2) When penny stock investing, part of your stock trading plan, it to be sure to look for positive single day movers with a higher than average volume. Look out for those companies that are developing new technology, products, or services, that will fare well in the marketplace in comparison to their competitors when stock trading.
3) You can also look for good stock charts to trade, in addition to looking for good companies to trade. Look at the stock price history including strong stock chart patterns of increasing value or potential value, when penny stock investing. Penny stocks that have a history of odd trading patterns and activity will most likely not sell in the stock market due to their unpredictable nature.
4) When penny stock investing some available stocks to trade are included in the Pink sheet stocks and the OTCBB (Over the Counter Big Board). These penny stocks are most likely new companies rolling-out new products. Once they are established, these stocks will move on to one of the major markets. Stocks that trade in the major markets are more than likely stocks from companies that have little growth potential or are companies that are losing money in regards to penny stock investing. To summarize, most publicly traded companies that are now listed on one of the major stock exchanges (NASADAQ, AMEX, NYSE) were penny stocks listed on the Pink Sheets or Bulletin Board at one time. Please, however, be cautious to avoid investing mistakes when penny stock investing via the pink sheets and OTCBB. Scam artists will typically scout out eager investors vetting on the fact that they these stock exchanges do not have strict reporting requirements.
5) When penny stock investing be sure to get a hold of a company’s current financial status as part of your stock research. A company with no debt (or a small amount of debt) that also shows a pattern of rising profit margins is one stock that you want to add to your list of 10-20. You should also find out how many shares the company has in its float, and if the product that the company is going to sell is patented? A patent will prevent other companies from producing the same product, thus effecting competition and consumer demand.
6) Regarding the scam artists mentioned above for penny stock investing, be cautious of emails offering the latest in hot stock market tips or emails announcing modern breakthroughs in medicine. The tactic for these scammers is to bet on enough people buying into these low stocks to increase the stock prices. Then they turn around and sell these hot stocks for a profit. Get yourself a strong spam blocker!
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