Find the best penny stocks to trade is the key to making good profits in your first foray into penny stock trading. Penny stocks have the ability to provide large returns for the trader who turns to them. This is why they are an all time favorite of stock traders especially newbie stock traders. One of the big reasons they are appealing to new stock traders is that you can trade them without having a large account.

It would be nice if every time you invested in a penny stock it would result in large gains. However, this is not the case. Some penny stocks should be avoided like the plague and there are many that involve pump and dump scams.

So how do you know which penny stocks to pick since there are thousand to choose from?

It is actually not a difficult thing to do once you know the things that you should be looking for or in some instances the things that you should be avoiding. There are many sites out there that would be more than happy to give you recommendations. However, I would be leery of most of them. They may be paid pumpers or they may have entered a position prior to their recommendation and will exit it once their subscribers run the stock up. I believe rather than looking to have someone make the penny stock picks, you should make the picks yourself.

Look for stocks with good volume that have signaled a buy with some sort of technical indicator. To find out more about how to pick the best penny stocks to trade follow the link.

A penny stock is any stock that is trading at less than $5 per share. Penny stocks are obviously riskier than larger more stable companies and they primarily move up or down based on speculation of what they could become in the future. However, the right penny stock can provide tremendous profits for the penny stock trader.

You will find penny stocks in each exchange. I focus primarily on the NASDAQ, OTCBB, NYSE, and AMEX. There are many who enjoy trading penny stocks found in the Pinksheets, however, I tend to shy away from them. Today there are many well known companies that have been relegated to the penny stock status (Citigroup, AIG, E-Trade, Blockbuster, Jamba Juice, Fannie Mae, etc).

When looking for a good penny stock to trade you should look for stocks with good volume. I usually look for companies that trade at least 500,000 shares on average (although I will make exceptions). Rather than trying to survey the entire universe of penny stocks I believe it is best to make a list of 10-20 stocks. This allows you to become more familiar with the individual companies and have some familiarity with their trading patterns.

I would recommend trading penny stocks on the basis of technicals. Let’s be honest the fundamentals of a penny stock are not too great so I wouldn’t put much confidence in the numbers. Primarily look at a 3 month chart, a 1 year chart and a 3 year chart to determine the overall direction of the stock. Look to see if it has broken a resistance and see if the trend is up. You do not want to fight the trend. Do not try to catch a falling knife with a penny stock. You can get your account cut up pretty bad.

If the stock has made a large move then wait for it to pull back to a level of support before entering the trade. This often provides nice profitable trades.

Remember, penny stocks are speculative trades. Do not plan on being in them long term. Determine what type of profit you are looking for and if you have achieved it then get out. They can turn and give up all profits in a hurry. I usually shoot for about a 20% move. However, if it seems to stall then I will get out and try to put my money to work elsewhere. You will have days that you make an easy 30-40%. When you do get fortunate like this do not be greedy. Take you profits and look for you next opportunity.

Trading Penny stocks can be exciting and financially rewarding. But remember that they come with risk. Be smart and never stick you entire account in any one penny stock. Do your own research into charts of the companies on your list. Stay away from penny stock forums. You will have a tendency to enter a trade without proper trading patterns being formed. Trust your own instincts and research.