How to Spot Good Penny Stocks
It is essential to do your preparation before you start to buy on the penny stocks market.
A few hours spent in research will bring dividends, quite literally in fact! Many investors lose large amounts of money because of lack of preparation, which leads them to make fundamental mistakes in their choice of shares. To make a good penny stocks investment there are a few points that you need to consider before you purchase.
Are your penny stocks quoted on the OTC-BB? If so it may be more difficult to find out important trading figures and they are not bound by the strict requirements of other exchanges such as AMEX or the Nasdaq Small Cap. To be listed in these markets there are very strong code regulations in regards to transparency and Shareholder communication.
Look at the history the history of the penny stocks. If a stock has shown to improve in value consistently over a period of time it is likely that the trend will continue. This sounds fairly obvious but it also works. You do however need to check that there are no uncertainties or trading inconsistencies that may alter the upward movement. This type of investment is likely to bring lower returns but higher stability than a more volatile share.
Do they have a good business plan? If a company does not have a good viable business plan for the next trading period and a good planning strategy for the future, then it is unlikely to achieve good profits or growth and may adversely affect the value of your investment. Always check that any company that you are planning to invest in has a good business plan. It will be your money that they are spending.
Pick the brains of professionals. There is a wealth of information on penny stocks and you should make full use of it subscribe to good quality, established, financial newsletters and publications that offer good tips on the best shares and penny stocks.
A lot of these are written by knowledgeable and experienced traders. You should try to look at a broad range of these, as it will give you a good overview of what is happening in the penny stocks markets. And it will also give you an indicator of which sectors of the penny stocks market are the showing the most movement which is also where the possibility for profit is most likely.
What you should avoid are the many free penny stocks newsletters and “daily tips from our expert’s” type of publication. Anyone who claims to be able to show you how to make a million quickly would presumably be repeating this system in quick succession and making themselves rich, rather than writing a free newsletter. Offers of advice on buying penny stocks from friends and relatives is very rarely of benefit. Unless of course they are dispensing the benefit of their wisdom from the window of their rolls Royce!
If you are going to subscribe to a newsletter then spend as much as you can afford. Penny stocks investors are, by their nature, well aware of the value of money. So if a newsletter is expensive and still has a good number of subscribers then the chances are that it must have some good advice to give, otherwise the membership would have left long ago.
Finally always consider the relationship of the penny stocks company that you are considering to the marketplace. If they are producing photographic development techniques when everyone is going digital then they may not be a good bet. No matter how low your penny stocks are they can always go lower so beware there may be a good reason for that bargain, and although hindsight is useful, foresight is better.
Penny Stock Author: Jarred Scott
Web Site: http://www.penny-stock-secrets.com
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