Penny Stock Articles
The Keys To Buying Penny Stock Shares Successfully
Written by troy on Friday, December 10, 2010 | No Comments
Categories: Penny Stock Articles, Penny Stock Investing, Penny Stock Strategy, Penny Stock Trading
If you want to develop a knack for buying penny stock shares successfully then there are a few things that you need to learn. There are many people that are trading penny stocks but many of these same people are not making money. Trade by trade they are whittling away their stock accounts. The reason that you get involved in stock trading is to make money, not to lose money. So let’s talk about a few things that you can do to to make you more adept at buying penny stock shares.
The first thing that you can do is to stick with penny stocks with good volume. When you trade companies with low volume and low price you run the risk that the stock could be more easily manipulated. Many of those that invest in low volume penny stocks become the victims of pump and dump scams. So if you want to have a better chance of succeeding then you need to stick with companies that cannot be manipulated. I am sure that there are different opinions about what good volume is considered, however, I will give you my opinion.
Although I prefer to trade penny stocks with daily volume in excess of one million shares I will settle for companies that trade at least 300,000 shares per day. I would recommend to stay away from companies with less volume.
The second key to buying penny stock shares successfully is to develop a trading strategy. Look, you will not be successful without a trading strategy. It is essential. You need to determine what triggers you are going to use to get you into a stock position and what triggers you are going to use to exit a position. The moment you take a position you should know what your plan of action will be. How much profit are you looking for? Where will you stop out if the penny stock moves against you? Will you sell some of your position if the stock moves a certain percentage? These, and many others like them, are the questions that you need to ask yourself before you make even one trade.
If you want to find success at buying penny stock shares then these two keys will take you in the right direction. There are other factors that will help as well. You can read through the site to find other tips that will help your trading.
How To Find Undervalued Penny Stocks
Written by troy on Wednesday, December 08, 2010 | No Comments
Categories: Penny Stock Advice, Penny Stock Articles, Penny Stock Investing
We all know just how powerful a penny stock investment can be. Think about how much more profit you can making by finding undervalued penny stocks.
Basically, every stock that is traded could be said to be one of three things. Either the company is overvalued, undervalued or fairly valued.
You will want to stay away from companies that are overvalued unless they are a strong momentum play. However, you will want to hunt down undervalued penny stocks because they should be that much more profitable when other traders finally begin to realize their value. Below are a few tips to finding such companies.
Most indicators of value actually require that a company have positive earnings. Now most penny stocks have negative earnings (they lose money). For those that do make money you can use a metric that is called a price to earnings growth (PEG). You can find this number on sites such as Yahoo Finance and Google Finance. Ideally you are looking for a number that is less than 1. This is an indication that the price of the penny stock is undervalued versus its prospects of growing its earnings.
A second financial metric that can be used to find undervalued penny stocks is the good ole’ PE ratio. Once again, you will need a company that actually has earnings in order to use this valuation. Rather than compare the number to a standard market PE ratio, I would compare it to other companies in the same industry. Yahoo has a very helpful section where it will show you the competitors of the company that you are researching. It provides the PE of those companies right in the snapshot. If you want to look up other companies just go to that companies page on Yahoo or Google and look up their PE ratio.
If your penny stock company is actually followed by a few analysts you can compare its current price to the price that the analysts say it could trade to by the end of the year. This will give you a good indication of whether you are looking at an undervalued penny stock or not. Just make sure that you stick with reputable research companies and not fly by night companies that are paid to make recommendations.
For those penny stocks that do not possess earnings you might want to check out a different ratio such as debt to equity ratios. How much debt do they have versus that assets that the company owns. If this number is high than the stock is most likely not a value play since they will have a hard time overcoming the debt that they possess. At some point they are going to probably have to issue more shares in order to continue operations. These are situations that you will want to avoid.
This is not an exhaustive list of how to find undervalued penny stocks but hopefully it will point you in the right direction.