Secrets to Finding Hot Penny Stocks
The secret key to any successful penny stocks trading is the
preparation. Know what you are buying and why you are buying it.
There are a number of factors that can help you to make a more
informed and, hopefully, more profitable decision.
Financial Information: The earnings to price equation is always
a good indicator of the health, or otherwise, of a penny stocks
company. If this ratio is lower than many of the other companies
in a similar industry then this is a good indication that the
company may be in a great position.
The Board of Directors: Find out about the CEO and directors, do
they have a nice history of running this type of company. A
penny stocks company with bad trading figures that has just
acquired a strong CEO may be about to change direction.
Do the Books Balance? If the company has a good cash flow then
it could be a good a good addition to your penny stocks
portfolio. But look a little more closely to see if they have
debts. A light debt load in comparison to turnover shouldn't be
a problem, but if the debt is large then interest payments could
begin to stack up and affect the company's profitability.
Know the Competition: A lot of large investment houses also deal
in penny stocks. These firms have large research capabilities
and resources and do not make investments lightly. If they
suddenly start buying unknown and / or lightly traded penny
stocks then there may be a good reason, and it may be a short
cut to a good opportunity.
Get Reports: If you are thinking of buying into penny stock that
is not familiar then a good, and often under used, way of
researching how the company is really doing, is to check the
annual and also the quarterly reports. They are a valuable
resource when finding out whether the company is a good
investment.
Selling: Sometimes an investment in penny stocks just doesn't
work not matter how hard you try, you are just not going to make
a profit. Be prepared to cut your losses and sell if this
happens, after the appropriate research of course. You will
never make a profit all the time and it is the larger picture,
your overall trading profits, which that count.
Brokers Recommendations: If your broker is recommending a
certain penny stocks that he thinks are worth buying then you
should listen. But always make sure to make your own decision.
Take what he has told you and do your own research before you
buy. Recommendations can often be a good way to get a head
start, but you should always be sure that you think the
investment could be profitable before you buy.
Bad News: Even when there is bad news about a penny stocks
company it can be a good opportunity for purchase and
investment. The larger penny stocks investment companies can
often drop significant amounts of stock very quickly if they
think the prices, and the trader's bonuses, are about to fall.
This can push prices much lower than the real value of the
company. If the company is well run and, apart from the news
that has caused the selling, it is trading well, it may be worth
buying and waiting for the shares to rise again.
Penny stocks can be a very good and profitable investment. Do
your basic research before buying. This is often more than half
the battle to making money. Making full use of a companies
reports, balance sheets, recommendations, financial reports and
websites could give you a good start to buying profitable penny
stocks. No successful trader ever buys without knowing why he is
buying and this in the best way to keep your investments in good
profits.