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Penny stock trading strategies

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.

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.

Penny Stocks

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.


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


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