Penny Stock Fortunes
Is it possible to make a fortune with penny stocks? Absolutely! And the reason is, a small amount of capital can yield large returns. It’s also important to note that penny stock investing can be risky. But savvy penny stock investors can minimize their risk by learning how these market operate. In this piece we’re going to look at a very generalized way to find good trading candidates. We’ll get more specific in future posts.
If you’re new to the penny markets it might be wise to seek stocks in an industry with which you are already familiar. You might do a search on such companies and make a list. Once you’ve got a nice basket of prospects, you’ll want to check out charts on each of these companies. Now, don’t worry about reading the charts just yet. What you’re looking for are patterns that show dramatic highs and lows. In stock market parlance these highs and lows are known as volatility. What you’ll be looking for is a stock coming off of a low and positioned to climb. You’ll find excellent free charts here: http://stockcharts.com/charts
Another important aspect of building your penny stock fortune is understanding how news affects the movement of a stock. Obviously, exciting news showing how a company might become more profitable should be a positive influence in driving the price of a stock higher. A word of caution on news: be careful when acting on certain news items. There are companies out there that will release what is known as a ‘fluff’ press release. Fluff news releases may or may not move a stock. One of the reasons I suggest you identify stocks you’re familiar with is you’ll have a better understanding of the industry, which allows you to evaluate news releases more effectively.
Another important consideration in choosing a candidate for investment is the daily volume of the stock. You should be looking for a stock that has significant volume. There is no rule of thumb for this. However, you want to be sure that if you do purchase a penny stock and it rises in value, that there are enough people out there who will be willing to buy it from you when the time comes to sell and that can be determined by healthy daily volume. Good Luck!
