Posts Tagged ‘Penny Stock Investments’
Are Penny Stock Investments Safe?
Written by troy on Wednesday, March 03, 2010 | No Comments
Categories: Uncategorized Tags: entry strategies, exit strategies, fundamental analysis, Penny Stock Investments, Penny Stock Trading, technical analysis, Trade Penny Stocks
The question arises all the time as to whether penny stock investments are safe. Before answering that question let me clarify that all investing has inherent risk. Yes, you risk losing money whenever you invest. This is true whether you invest in bonds, mutual funds, commodities, blue chip stocks or penny stocks. So the answer to the question is that no for of investing is 100% safe.
So where do penny stock investments fall in the order of safety? No one is trying to be deceptive. Penny stock investments can be risky. However, if you are going to trade in penny stocks then you need to realize that they are not long term holds. I would never recommend buying a penny stock and holding it for five years. The fundamentals of these stocks are so poor that it is difficult to even make an informed decision about the prospects of the company. I would have no idea where they would be in five years. But I may be able to predict their near term trading pattern over the next two weeks.
Penny stock investments are really not investments at all; they are trading vehicles. The point in trade penny stocks is to move in and out of them to take advantage of the large swings that they often present us with.
If you put in place a very disciplined and strict trading program you can limit much of the risk involved in penny stock trading. If you narrow down the stocks that you will trade to those that provide you the best liquidity and near term visibility of price movement you will go a long way to limiting your risk. Trade penny stocks who have had recent good news or who have already reported earnings. This way there is less of a likelihood of a downside surprise.
Once you have narrowed your trading list down then you need to trade on the basis of some very defined entry strategies and exit strategies. Know why you will get into a stock and why you will get out. I do not recommend that you ever make those decisions based on fundamental analysis. You are a trader and should make your trading decisions on the basis of technical analysis.
Determine what triggers will get you into a position and which trading signals will get you out. The same principles of technical analysis apply to all stocks regardless of their price. Become a student of technical analysis and apply what you learn to your trading of penny stock investments.
Some Tips for Trading in Penny Stocks
Written by troy on Thursday, June 11, 2009 | No Comments
Categories: Uncategorized Tags: Penny Stock Companies, Penny Stock Investments, Stock Market
Experts recommend that you shouldn’t invest more than 20% of your portfolio in penny stocks because of their unpredictable nature. They are the tiny yet feisty fighters of the stock world—sometimes they pull through and beat the odds, but other times they explode into a nightmare of losses. So, start small. Keep your penny stock investments low at first until you have seen how your picks perform.
Volume vs. Value
Of course you’ll be tracking the companies, but you need to know what you’re looking at. Just because a company’s trading volume is high does not necessarily mean that they are performing well. They could be trading in erratic spurts and stops, which aren’t good for your investment because everything could suddenly come to a halt, leaving you not-so-metaphorically holding the bag. (And the bag will be practically worthless.) What you need is steady, consistent trading volume with lots of trading partners involved in transactions. This means that a company is thriving and worth your time.
Don’t Dream Too High
Penny stocks are literally loose change, which makes them bad performers and practically worthless a lot of the time. If you’re going to try your hand at them, be aware of this. You are essentially dealing with the stock market version of a Vegas slot machine. Yes, big fortunes do happen, but the myth of big fortunes is much more common. Keep in mind that many penny stock companies are fronts for struggling, underperforming companies, and steer clear.
Does the company know how to make profits?
It is not unusual to see a startup company operating at a loss, it is important to examine why they lose money. Is it manageable? Will they have to seek other funding (due to a dilution of your hand), or will they have to seek a partnership that favors the other company?
If your company knows how to make a profit, the company can use this money to expand their business, increasing shareholder value. You need to do some research to find these companies, but when you do; you reduce the risk of losing your capital, and increase the chances of a much higher return.
How did you hear about this stock?
Most people learn more about penny stocks through a mailing list. There are many good penny stock newsletters, however, there are also many who are pumping and dumping. They, with insiders, loading up on shares, and then begin to pump the company newsletter subscribers unsuspecting. These subscribers are insiders buy sell.
Having worked in industry for the last 8 years, I saw my share of companies and unscrupulous promoters. Some are paid in shares, sometimes in shares (an agreement whereby the shares cannot be sold during a certain period of time), others by money.
How to identify good companies from the bad? Simply register, and track investments. Is there a legitimate chance to earn money?
By: Pankaj Gupta
About the Author:
Pankaj Gupta Author of whisperfromwallstreet.com consultant of Buy Penny Stock Online, Penny Stock Pick, Buy Penny Stock, Buy Penny Stocks and Penny Stock Market.