Penny stock trading strategies
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As per U.S. Securities and Exchange Commission The term "penny stock" generally refers to
low-priced (below $5), speculative securities of very small companies.
They may trade infrequently, which means that it may be difficult to sell
shares once you own them.
Because it may be difficult to find quotations for them when you want to do
investment | Trading, they may be impossible to accurately price. Investors in penny stocks
should be prepared for the possibility that they may lose their whole investment.
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Does it ok to invest in penny stocks?
If company management are active and trying to take company at next level then it's a best
opportunity to keep some stock in portfolio, because if company management moving
in right direction & trying to pull up to next level, they going to become successful
one day & in case they see's company not able to go next level they consider
for merger with some good company & that offer good return on your investment.
It is not advisable to place all eggs in one basket because you know company
all ready in trouble. You can loose all of your investment. I am looking Microcap Company
as a member of that list, they can close door any time & you loose your
all invested money, so never put all of money in single penny stock trading. Same
way if company comes out from its trouble area that gives you real good return.
It is heard to find accurate information regarding financial reports, product, management,
services and health of any microcap companies because they not filing financial report
to Security and Exchange commission (SEC) Due to limited reliable source anybody can
spread wrong information about micro cap companies.
Primary check points before to invest
To invest wisely and avoid investment scams do research before to investment.
These simple steps can make the difference between profits and losses.
Find out whether the company has registered its stock with the SEC or any state's
securities regulators. Find out about the company's business and its products
or services.
Read carefully the most recent reports the company has filed with SEC or any state's
securities regulators and pay attention to the company's financial statements,
particularly if financial reports are not audited or not certified by an accountant.
Here I give you one example, you going to buy new car with well known brand name, how
much you pay? And if you buy chip car how much you pay? Here you see's the big
difference in quality, performance, safety future & all other aspect. In this case
you know why people buying good brand name car? Because people don't want to stay
on road!!!! And don't want to compromise with safety, that the reason you paying
more money.
You need to consider stock also same way as your car, because what ever you paying you going to
get that range quality. But in investment majority of people forgetting this basic fundamental.
Now you know difference between penny stocks and good quality security, so don't invest all
money in single microcap company.
Successful penny stock investing like professional
To select microcap company for investment | Trading you need to check some important basic
factor like :
- Insider Interest
- Big investment from any institution.
- New development
- Company news
- Management efficiency
- Management recent action
- Acquisition interest from some good company
- New product
- New certification, awards, presentations
Insider Trading:
Insider’s means company directors, executives, officers who are involved in the decision
making process and they knows what is going on in the company. When the insider start to
increase their holding from open market in big quantity that indicating strong positive
development are there and in near future company going to give some positive news.
Insider buying is a positive signal for stock trading or investing. Particularly for
penny stock picks to investment insider trading is a good indication to entry.
In many microcap company's officers and promoters own significant amounts of the share.
When one person or group controls most of the capital asset, they can more easily
manipulate the price at your expense. To dump their holding they using "pump and dump"
Techniques. So for penny stock investing insider buying is not enough criteria you need
to check other aspect also.
Big investment from any institution
Suddenly if institution starts to take interest in particular Microcap Company is again
positive news for that company.
New development
This new development like something new product or service that is in development stage goes
in next stage closer to final stage. This is an ideal company's for investment.
Once this goes in production it jumps up like a crazy.
New product
Any company comes out with new product or new services are a best candidate to buy. New product
of any company that can easily turn in big profit. If you check a history of many companies like Microsoft, Pfizer,
Merck, Intel they all was penny stock in past and today they become industry leader. Important thing is a research, news analysis
and write information source.
Technical Analysis
I am giving same weightings on technical analysis like all above factor, for short term and long
term investment. That way you can enter right time and exit right time. Support and
resistance analysis | breakout techniques also gives good result on your microcap investment.
Low risk penny stock Trading strategies
The company who are paying dividend means its financial conditions is not
too bad, once the reason who turns company in penny category, resolve, that give you nice
return on your investment. For any stock dividend is a biggest positive point for
investing.
Large cap
Personally I am giving less weight on large cap penny, off course, they are
lowest risk but due to large cap that moving real slow and taking long
time to hit your target price.
Mid cap and small cap
This a right choice because company management is centralize and they watch companies
progress batter way, and it’s more easier for management to enforce employ to work
their way that help to fast recover, due to small capital we can place it in little
more riskier investment then large cap but low risk then other companies who are
not paying any dividend.
Trading volume
For any type of stock investing including penny you need to stay selective with respect to
daily trading volume. Basically that depends on your investing criteria. Majority
time in penny stock volume increasing after certain price level so best strategy
is built position with low investment and when current start and volume increase
start to average up. I am against to any average down, it is more favorable to cut
position after it loose certain amount because that indicating company in trouble
bad way and it can not easily come out with batter prospect so keep in mind to do
average up not down.
Company paying dividend it doesn’t means there is no risk, yes risk is there but little
bit lower then other penny investment. To protect your capital always keep stop loss suitable
to your risk tolerance.
Risk
While all investments involve risk, micro cap stocks are the most risky investment. Many
micro cap companies tend to be new and have no proven track record. Even many of these
companies have no assets or operations. Others have products and services that are still
in development or have yet to be tested in the market. Another risk is majority penny
stocks trading with low volume then its a difficult to buy or sell at your target price.
Low volumes of trades are a biggest problem. Because micro cap stocks trade in low volumes,
any size of trade can have a large percentage impact on the price.
You can trade but before to trade understand your risk. If you are quick enough to take
right decision and if there are still enough pressure built up | buying interest then you
can ride on the run up, and you should consider getting in and out the same day - sometimes
within an hour.
Many of the micro cap companies not filing any financial reports with the SEC many time
they don’t have any businesses or products or services. But the lack of reliable source of
information there are more chance for micro cap companies can open the door to fraud. It’s
easier to manipulate a price because little equity. Micro cap fraud depends on spreading false
information.
Penny Stocks Recommendation
we recommends technically up trend hot Penny Stocks on the base of technical analysis, news and
global events analysis, with support and resistance who are breakout with High Volume considering
that you can plan your investment | Day Trading | Swing Trading | portfolio Strategy.