Penny Stocks - Turn Your Pennies Into Dollars

Penny Stocks - Turn Your Pennies Into Dollars

We've all heard about the investor how bragged about his 100% or 1000% return on a stock or about the guy who made it rich by investing in small caps, undiscovered stocks that made it big. In theory, it seems to be too easy. Invest in a couple of penny stocks, then sell them when they move up. Unfortunately, it is too easy. Too easy to lose money unless you know what to look for.

First, lets have a look at what types of companies trade on the OTC BB or Pink Sheets.

Stocks that no longer trade over $1 on the Nasdaq
These include companies that fell from grace (Enron). While it is possible that they may see better days in the future, the odds are stacked against them. Its usually best to avoid trading these stocks. If you feel that the temptation is too much, wait until the stock begins to rebound. If you try catching a falling knife, you will get hurt.

New Start Ups
Every year there are hundreds if not thousands of companies who decided to go public. Whether they need the money to expand their business, or are looking to cash out their equity, its a natural progression for a company with a compelling story, and a great track record to go public. While many of these companies will file for an IPO, many others will start off trading on the OTC BB as a penny stock

Second, lets look at some tips to help the penny stock trader avoid making costly mistakes.

Due Diligence
Stocks listed on the Pink Sheets don't have to file annual or quarterly statements. This makes starting your due diligence difficult. Often, the information is sketchy at best, and typically, its biased. You should expect a shareholder to say good things about the company. If the company didn't have potential, they wouldn't be holding it. Or, they might be hoping to unload their shares and hope to talk you into buying.

Stocks listed on the OTC BB file annual and quarterly statements. This provides some measure of financial success. You'll find most penny stocks lose money, whether through managerial incompetence, or research and development. The key is to identify the companies whose management has a record of consistently making money, or at the very least, delivering on their business plan, and decreasing expenses.

Penny Stock Newsletters
Being a writer for The Leading Source (http://www.1source4stocks.com) puts me in a biased position when speaking to penny stock newsletters. Here's what I can tell you: be careful! Check the disclaimer for the amount the newsletter is being paid to carry the profile. Are they being paid in cash or in shares? You'll likely find a corelation between the number of shares they are being paid, and the rating on the hype meter. Does that mean that you should avoid any stock where the company is paying IR professionals in shares? No. Just keep in mind that they are selling a story, and if they sell the story to other shareholders, they will gain. This is not a problem if you get in early, but could be a problem if you aren't able to jump in right away.

Take a look at the track record of the newsletter. Have they profiled winners? Do they state the facts, or state the hype? Do they also offer unpaid stock profiles? If they do, you'll likely find that they do their own research in all companies, and are looking to ensure that they aren't passing a weak stock your way just to pay the bills.

If a company is paying an IR professional money to profile a stock to its subscribers, should you avoid it? Of course not. Think of the payment as advertising. They are promoting the company, and trying to get exposure. Like any company, the only way to get exposure is through some method of advertising. So dont dismiss a paid profile as hype. Keep it in the back of your mind while you are reading the profile, but pay attention to the profile. You may find a diamond in the rough that no one has discovered.

If you want to make money, you have to be able to buy and sell enough shares to lock in your profit, or protect your capital. If ABC company's daily volume is only 500 shares a day, it may take you several days to accumulate a position worth taking. If there is bad news, who is going to buy your shares? If the volume is low, stay away. Its not worth it. If you feel that strongly about owning the company, consider contacting the company directly and working out a deal.

Buy Results, Not the Story
If you buy the hype, odds are, you will end up being the last one to own the shares, while everyone else has sold off their position. Look at a company, take a look at what their business plan was, and confirm if they have followed through on that plan. Were they successful? Did they bring a product to market on time? Did the company follow through on its acquisition strategy in the manner they set out? The hype might get you a quick pop, however, unless you are watching your trading screen every second of the trading day, you will miss out.

Size matters
There are thousands upon thousands of penny stocks. The size of your position should not be anymore than $2000 - $3000. While this may not seem like much, keep in mind that its not unusual for a $0.10 company to drop to $0.05. That's a 50% loss. If your position is $10 000, a 50% haircut leaves you with only $5000. Keep your losses to a minimum. If the company has done well, and you are up, either take your profits off the table, or add to your position, and be sure to reset your stop loss so as to protect your previous profits. Capital preservation is the key to successful trading.

Have a plan before you buy penny stocks. What are your reasons for buying. What is your exit strategy? Where is your stop loss? At what point will you take your profit? Write down these answers before you place that buy order.

Penny stock investing
can be profitable. Remember, you are taking larger risks than you would if you were purchasing shares in a bank stock. That risk can be rewarded with returns that you cant get with a bank stock, or, it will be met with a large loss and a bad taste in your mouth for investing in penny stocks.

Do your homework, don't believe the hype, and protect your capital.

Note: The Leading Source provides its subscribers with both paid and unpaid profiles. Follow those tips and you will watch your pennies grow into dollars.

Essential tips before buying penny stocks for all investors

Buying penny stocks tips are the source of information and investment decisions for most investors. Information may easily be availed but investors really have to decide for themselves which of these penny stock picks contained will probably be worth investing in. It may seem a simpler task than said. The trick here is to find out how you can make use of information from these picks to earn good and worthwhile investments. For individuals requiring information relating to penny stock investments, the sources are aplenty and readily available. Among most of the many sources are publications, books and the many penny stock investment websites contained over the internet. Another possible information source for penny stock investment is the business/financial sections of the local newspapers that contain, among other things, free penny stock trading tips. Among the various available penny stock websites, www.buyingpennystockstips.com is seen as a well liked amongst many penny stock investors. The site contain many free tips, information and advice on penny stock investment which may be used by both experienced and completely new penny stock investors. These include basic introduction to penny stock, education on penny stock investment and also a set of free penny stock picks for investors to watch. The Internet has offered to rise to many new techniques which includes what is also known as online penny stock investments. Investors can indulge in hassle-free penny stock investments from their home merely by possessing an internet service and connection which is stable and runs round the clock every day. Investors make use of material available online including free penny stock tips to help in their investment decisions. Online investment brokers play an important role in regards to online penny stock investments. The global economic turmoil has seen many people jumping in on board in penny stock investments. These people enter in the market without having preparation and quite often make investments without good planning. This might lead to severe losses. These investors invest influenced by hype, hoping to make profits quickly. Information to free penny stock tips may be readily available to investors but understanding how and when to make use of this can be the true secret. Experience, along with study can help one to differentiate between a good penny stock and one which is otherwise. Because of the rising popularity of the penny stock market, there are plenty of individuals committing fraudulent acts. Claims to be brokers or professionals in the penny stock industry have been made in order to dupe genuine investors. These people uses tactics such as attempting to influence investors with bogus free penny stock tips for some of the latest penny stocks. They will seems to be pushy and will not take "No" for a solution. Victims of these cons often end up losing their funds. For new penny stock investors, taking time to know the penny stock market may benefit in the long term. Researches and studies may be easily conducted utilizing the numerous free penny stock tips such as those contained in the papers. As a result this will lead to investors ability to make healthier investment judgements. Further information can be found online at http://www.buyingpennystockstips.com