Image text: "What to Look for in a Penny Stock Trading".

Penny Stocks – What to Look for in a Penny Stock Trading

Many people who are interested in making money in the stock market will turn to invest in penny stocks.

These stocks offer many benefits to the smarter investors and are much cheaper than blue chips.

But it also means that they are very vulnerable to fluctuate up and down at any time.

If you are interested in investing in penny stocks, here is what you need to know.

What are Penny Stocks?

Penny stocks are stocks that are under the value of $5. To identify these stocks, you just have to look for the value of their market cap to be less than $5.

There are some companies that also trade under the ticker symbol, such as QID, IND, BID, SPH, etc.

These companies are small and it is important that you know the criteria for identifying these companies.

To identify these stocks, look for stocks that trade under $0.01 per share. These stocks have very low value and this makes them vulnerable to go down at any time. But they also have the potential to go up very easily.

Who is interested in investing in these Stocks?

Investors in these stocks are people who like fast profits. These stocks have the potential to give you big money, but you have to take action quickly.

In order to identify these stocks, look for stocks that have a short period of high volume. This will be explained in details later.

How do I identify these stocks?

A major advantage of these stocks is that these companies will let you trade in their stocks anytime you wish to buy or sell.

This is very convenient for you as you can buy and sell your stocks anytime you want.

How do I trade in these stocks?

To trade in these stocks, you will have to open a share account online.

Once you open your account, you can access many trading tools that will help you identify these stocks.

These stock charts and graphs will help you analyze which stocks will give you good returns in the future.

And if you are investing in these stocks, you must ensure that you trade only high-value stocks.

Image text: "What to Look for in a Penny Stock Trading".

Don't you think that there are other ways to obtain similar returns as these?

I guess it is obvious that any stock trader has the motivation to find more great stocks, but one of the best ways to find these is by doing the research yourself.

As I've said earlier, it can be tedious at times but it is definitely doable.

Once you have made your list of great stocks, you need to research the companies in which you are investing.

There are many techniques you can use to research a company including looking at their financial statements, reading their annual reports, watching their recent news, etc.

However, most of the time, simple research will suffice for your evaluation.

Penny Stock Definition

In order to identify these stocks, look for stocks that have a short period of high volume. This will be explained in details later.

Here is how I see stocks performing.

I would look at the current price (from a past price chart) and compare that to the daily price.

If the stock is currently undervalued and I feel that it's undervalued because of its fundamentals, I would look to buy the stock at a given price:

  • The first thing I would look for is a low Volume. You would look at the Stock's chart on your radar graph and notice that the stock volume is quite low compared to its price. This would tell you that this stock is selling well and is probably breaking out of a trading range.
  • Next, I would look to see if the stock has recently been trading above its 200-day moving average. This would tell you that the stock price is starting to move up, but the stock is slowing down before making a new high.

You may also look at the company's price and volume graphs to find this information, however, it's best to research the factors yourself.

Remember, there is no sure-fire way to find stocks that have this trait, but the more information you have the more chance you have.

A Tip To Live By As A Penny Stock Day Trader

To conclude, the ultimate goal is to try and find stocks that are undervalued, then to purchase them at a discount then sell them at a profit. However, this is not always possible. To make money in the stock market, you have to learn and manage your risk.

It's true that this strategy isn't guaranteed to get you a guaranteed profit. However, it's a fast way to increase your profit from 10% to 20%, when you can find stocks that are trading at the same price as they did a year ago.

Penny Stocks Trading Guide for Beginners

You see, the difference between the current price and the then-current value is the gap. Gaps are formed by a company's highs and lows.

A gap of 10 from the high to the low gives you the current value of the stock. This is why it takes a year to move 10% in either direction.

However, this is not true at all times. This is where our other friend, margin follows suit. Margin is just what it says, it's the amount you are lending the company. It allows you to borrow the stock for the amount of money that you choose.

Hot Penny Stocks

If you had $2,000 and want to buy the stock, it will cost you $2,000. However, you can use your margin of $500 to buy the $2,000 worth of stock.

However, if the stock goes down, you can sell the stock at the lesser price of $1,500. In essence, you're gaining $500 because of your margin. You're earning a total of $700.

This can be why many penny stock traders use this strategy.

It allows them to not only trade more efficiently but more importantly, protect themselves from losses.

Because of the leverage, they can buy more stock for the same price. You're still earning a profit, but less risk.

Trading Penny Stocks – Conclusion

Penny Stocks Trade: To conclude, always ensure you thoroughly research your stocks before you invest in them.

This way, you will ensure you are investing in the best company for you.

You see, stocks don't have a year-long future. The value can change from day today.

However, if you do your research, you can make the right decisions, you'll be able to ride out the ups and downs. The second thing is your trading plan. If you don't have a plan, then what are you trading?

Text says: "What to look for in a Penny Stock".

You May Also Like These Topics...
Image text: "Trading Drip Buys Stock".

Trading Dip Buys Stock – How to Become a Fast-Paced Stock Trader

Trading Dip Buys Stock: Buying the dips refers to going long an asset or security after its price has experienced a short-term decline, then repeat this for more buying. It's all about timing investment purchases to buy stocks when they have dropped in price, assuming they will subsequently rise again. A momentum stock can experience […]

Image text: "How to find stocks to short".

How to Find Stocks to Short

Here's how to find stocks to short. For basic shorting help and advice such as the short interest ratio, the number of a company's shares that have actually been sold short divided by the average day to day quantity you can normally go to any web site that includes a stock quotes service, such as […]

Image text: "Which companies are in the FTSE Top 100 UK".

FTSE 100: Which Companies are in the FTSE 100?

On This Page FTSE 100: Which companies are in the FTSE 100? FTSE 100: Which companies are in the FTSE 100? The largest companies of the united kingdom greatly impact the British and world economy. The UK's top 30 publicly traded companies, major components of the ftse index, are presented here together with their activities, […]

Image text: "What is the FTSE 100 Share index".

What is the FTSE 100 Share Price Index?

FTSE 100 Share Price Index: The FTSE 100 is the British blue-chip index and consists of the 100 British companies with the highest market capitalization, the growth of which is reflected in the index. In total, the companies listed in the FTSE 100 represent around 81 per cent of the entire market capitalization traded on […]

Previous Post
Image text: "How to find stocks to short".

How to Find Stocks to Short

Next Post
Image text: "Which companies are in the FTSE Top 100 UK".

FTSE 100: Which Companies are in the FTSE 100?


  1. Pingback: How to Find Stocks to Short - 100 Shares Network

Comments are closed.