A penny stock is a cheap stock that has the potential for a high profit. Some penny stocks are better than others. If you want the best penny stocks, you should know how to find them. This will also help you avoid fraudulent and unscrupulous traders, keeping in mind that these stocks are not regulated by the Securities and Exchange Commission (SEC). These stocks are more volatile than traditional stock and you should, therefore, be careful with them. There are several tools that have been developed, some Web-based and some that come as software. Using these tools is advantageous in that you will get a clear direction of the stock and you can then forecast the future. Stock charts are particularly useful.
Find as much information on the penny stocks you are considering as possible. You could read financial magazines, but the Internet is the best place to get the information since the information is readily available cheaply, conveniently, and anonymously. You could join relevant discussion forums, visit SEC info sites, or join chat rooms discussing penny stocks.
Consider enlisting the services of a broker, especially when starting out. More and more people are going for online brokers since they offer cost benefits, anonymity, and unparalleled convenience. A broker will have the necessary training and experience to make a good choice on penny stocks as well as the necessary tools for the job. Not having to invest in the tools needed means you end up saving money. Hiring a broker is a good option even if you want to trade yourself since you will get valuable tips (keeping in mind most major brokerage houses will not trade in stocks until they hit the $5.00 level). A broker is, indeed, the best option if you are too busy at work. There are companies that are not really brokerage houses that research stocks. Consider enlisting the services of such a company.
You should familiarize yourself with the penny stock market if you want the best penny stocks. Choose the market to invest in carefully. The primary markets are NYSE, NASDAQ, Pink Sheets, and OTCBB (OTC Bulletin Boards). The OTG market is further classified into 4 segments namely OTCBB, Grey Market, Pink Sheets, and OTCQX. The four are different in terms of the degree of fiscal information disclosure and the reports submitted to the SEC.
You should do thorough market research and do fundamental analysis of the penny stock you are considering. This will help you predict penny market trends. Analysis is particularly important on the income statements and balance sheets of the penny stocks you are interested in. Determine if the revenue in the past 3 years has been on the increase or on the decline. You should, also, consider the strength of the business by researching on the services/products and the strength of the brand. Research the whole industry to determine if it is on a growth path.
You should be disciplined in the trade if you want success. Never invest more than you can afford to lose. Do not let your emotions (such as greed and fear) guide your trade. Consider trading in paper money until you are confident that you can trade in real money. There are many online platforms that allow you to do this.
Create a strategy and stick to it. Your strategy could borrow heavily from strategies that have been tried and tested, but it should be personalized since we all have different strengths and weaknesses. Do not give up too easily if you want the best penny stocks you expect to lose money on the first few tries. You should have an exit strategy. Some people are just not cut out to trade in stocks.