5 Tips for Investing in Penny Stocks
Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles. 1. Penny Stocks are a penny for a reason. While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker's money for an IPO. This doesn't make them a bad investment, but it should make you be realistic about the kind of company that you are investing in. 2. Trading Volumes Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn't trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding "dead money", where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price. 3. Does the company know how to make a profit? While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company? If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return. 4. Have an entry and exit plan - and stick to it. Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you're out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen. If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential. 5. How did you find out about the stock? Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here. Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash. How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You'll start to notice quickly if you have subscribed to a good newsletter or not. One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you'll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk? http://www.1source4stocks.com>Trading Penny Stocks | investment strategies for penny stocks
1source4stocks.com provides penny stock traders with online trading and investment tips, online trading strategies and penny stock picks. |
Other Trading Tips Articles
Top Ten Ways to Manage Interruptions So many people I worked with said they got more work done at home than in the office. That was because there were so many interruptions in the office. In fact lots of people come in early or stay late just to have quiet time to work. One way to have that same quiet time during the day is to manage interruptions. Look for ways to create a “Po ...eCommerce for Import Export Companies This year, according to eMarketer, one billion people worldwide will have Internet access and nearly 250 million households will have broadband. Although, Asia accounts for 56 percent of world population, but only 10 percent has access to the Internet at present. With the rapid economic development of Asian countries this figure will increase dr ...Lord of War (2005) Deconstructed From our deconstruction of hundreds of Hollywood blockbusters at www.managing-creativity.comLord of War (2005) follows the Hero's Journey template:FADE IN: context [the arms factory; credits; the journey of a bullet from the factory to the murder].Introduce the antihero [Yuri Orlov's back story; Ukranian, immigrated with his ...What Are Some Of The Factors That Make Forex Markets Different? There are a number of factors that make the Forex market unique. Many of these factors can have tremendous benefits for traders worldwide. Two of the most important are the high level of leverage and the extremely high liquidity.Forex markets have some unique features that provide an incomparable potential for profitable currency trading ...Natural Gas - Make Massive Profits From The Next BIG Bull Energy Market! We have all seen crude oil soar to all time highs making huge profits, but this huge move could be repeated, or even exceeded as natural gas soars in value, based upon increased demand and limited supply.If you are a seasoned trader or one who has never traded before, this article is for you. We will show you why natural gas is set to soa ...Top Tips For Affiliates – If Only You Desire Success I am sure that you are reading this stuff because you already know that some people are earning fat checks monthly from affiliate programmes and you probably want to duplicate their success story. However, your case has been different and opposite. Affiliate programs have never put enough money in your bank account; rather, all your efforts are ...7 Tips for Bartering Products and Services What better way to gain a new customer than by getting something you need in return? The following are tips to help you use bartering correctly, and make it a good experience for both you and who you are bartering with.1. Make It Fair Be sure you are both trading a fair value including shipping. It may be neccessary to trade more than ...Some Really Easy Ways to Make Money Attaining money has always been a problem, no doubt about that. But the real problem is that we have our own selves to blame for making money such a problem. It has something to do with our preposterous habits of taking blue collar or white collar jobs and expecting them to be enough to earn as much as we need. This is not the case, and many peo ...Forex Trading - A Brief Introduction Forex trading refers to the buying and selling of the currencies of different nations, i.e., one currency is bought and another sold at the same time. A Forex deal involves profit when you sell a currency at a price higher than what it cost you to buy. Foreign Exchange market is the largest liquid financial market in the world in terms of the tu ...10 Shocking Ways To Super-Charge Your Sales 1. Test different web site color themes to see which combination will sell your product better. You can also test the size and style of your web site text.2. Promise your readers an end result or outcome in your ad. You must give them a solid guarantee that your product will solve their problem.3. Never assume people believe the in ...Tips in Choosing the Perfect Online Dating Site The internet has become a breathing ground for both professional and amateur matchmakers. Although some matchmaking are conducted through chats, friendster messages, yms and emails, the use of cupid’s arrows are basically done through online dating sites that seem to have mushroomed in the World Wide Web.In fact, there are about a hundred ...Short-Covering Rally A short-covering rally is a more orderly event in which a large number of short sellers decide to take profits by covering their positions. The buying to cover often leads to more buying. It can produce a wild short squeeze, but in most cases the action is milder.You’ll see a short-covering rally in many beaten-down stocks. The greatest i ...Financing Structure Tips Let us first examine the various parties involved in a financing transaction. On one side of the playing field there is the private company in the process of raising capital. On the other side there are the investors. Investors may include, family and friends, Angel Investors, Private Equity Firms (also known as Venture Capital Firms) and Hedge ...Stock Trading Tips And Advice That Can Help You Make Money There are countless books that have been written about buying and selling stocks, and as a beginner, it's definitely worth reading at least a few of them. Be careful, though, because jargon is rife through the world of stocks, and it can be a bit overwhelming when you first stumble across terms like P/E, RSI and EPS, to name a few.It's v ...Forex Trading Style: 7 Essential Indicators You Need When developing your own forex trading style, there is a danger in becoming fascinated with indicators. The newer trader experiments with one, finds it doesn’t work so well, then switches to another, then another, etc.The list below highlights 7 key indicators that can be woven into your forex trading style. You may not need to go any fur ...Guess Who’s Coming To (Holiday) Dinner Mom? Meeting the parents is symbolic of moving to the next stage of a relationship. The expressions " the kind of girl you can bring home to your mother" and “a guy even your dad would approve of-” come to mind. Getting the green light from family helps an individual to feel that their significant other is "the marrying kind”, due to their ability to ...The Scalp This term should be familiar to anyone who has bought prime tickets to a big game or concert at the last minute by making a deal with a guy who yells "Got two here!" in the stadium parking lot. The guy in the lot bought the tickets earlier at the lowest possible price. He has no desire to attend the event. His goal is to negotiate a deal at a hi ...Top 10 Ways to Start a Business For Less Than $500 We've heard numerous success stories of Internet entrepreneurs like Jeff Bezos, who started Amazon.com from his garage, using cheap plywood to construct desks. There are scores of others and they never fail to make new entrepreneurs feel a little overwhelmed or dare I say, jealous. Well not every business has the moneymaking potential of some of ...Who You Should & Shouldn't be Trading Links With Most people agree that a good and free way of getting traffic to your site is by exchanging links (reciprocal linking) with fellow webmasters. This is also agreed to be a good way for moving up the search engine results page for your chosen keywords.However webmasters are often confused as to which sites they should exchange links with. ...Top Ten Tips for Improving Your Cash Flow Cash is king—so they say. If you work for yourself or someone else, you need to be aware of ways to improve the cash flow. Budgeting and collecting are not glamorous but they are both key to having a successful business. Working in a successful business is much more fun than working for a struggling one!1. Stick to your budget. ...The Advantages of Technical Analysis for Currency Trading We have already looked at the difference between fundamental and technical analysis of currency trading in our “currency trading success” article, here we will concentrate more on the advantages of technical analysis for currency trading and how to build a successful system.There are many different methods and tools utilized in technical ...Top 7 Work at Home Small Business Ideas Here are seven great businesses that you can operate from your home.1. Affiliate MarketingAn affiliate or associate program is a method of selling products on the internet through commission sales. When someone you refer to a website buys, the company you are an affiliate of pays you a commission. In many cases, it is ...Forex Trading Courses To put things simply, Foreign Exchange (FOREX) Trading is the buying and selling of international currencies. Just like any other work you engage in, you need to have a basic knowledge on what makes the industry work and how it works, in order to make decisive analysis and intelligent decisions on each transaction. If you do not have any idea on ...Loans for Self-Employed One of the most fundamental details that all banks will look for in all loan applicants is a steady, dependable income. The amount of this income will decide how much the applicant will be granted. If there were no dependable income, then on the face of it, it would appear to a lender’s calculation, that the loan amount should be zero. This is t ...Oil and Real Estate There are some real differences between the workings of the stock market and those of real estate. At its core the housing market, like the stock market, is all about supply and demand. However, the difference is that stocks and bonds investors base their decisions to buy into stocks on future potential, whereas real estate investors base ...Mobile Car Wash Companies; Trading Tips If you run a mobile car washing firm we recommend trading for as many products and services as possible. You should trade for both personal and business items. You need to keep in mind that your gross sales will go down as you do this because money will not be taken in for these services you perform. You will however, notice a significant inc ...Top 7 Tips to Recognizing Bogus Expert Business Articles How can you spot an expert business article writer or knowledgeable business consultant from a wannabe pretender self-proclaimed marketing guru? It is difficult to separate those with actual business experience from those who are self-promoters of nothingness. I have developed the Top 7 Tips in spotting the bogus expert business articles and unc ...Is Your Autoresponder Truly Promoting Your Company? Getting other people to promote your web site is one of the most popular Internet marketing methods around, today. Affiliate relationships are all the rave with people who have web sites. Web marketers worldwide are trading links everyday, in hopes of driving each other's traffic to their respective sites. This is certainly something any hard ...Part II of Day Traders and Swing Traders and Options? Maybe! Before every protective put trade it is possible to calculate your anticipated maximum loss. Use the formula: (stock price minus strike price) plus option price. For example, suppose you will pay $30.00 for your stock, and you want no more than a $3.50 loss on the position. Then you would choose the $27.50 strike put which ...Keep Your Powder Dry In A Market Like This Do you remember the “frenzy” or “froth” moves that were among the wildest aspects of the late-1990s bull run?In those days it was common to see gains of 20 and 30 points or more in one session. A stock might open at 120, promptly run to 150, settle back to 130, and then sprint to 150 or higher at the close.The true frenzy plays pop ...
|
