Penny Stock Investing

Posted: Dec 28, 2010 |Comments: 0 |

For anyone new to investing in penny stocks, you should first be made aware of the differences between these micro-cap stocks and the more conventional blue-chip and mid-cap investments. Unlike buying shares in a large, stable company like Ford or IBM, you are dealing with speculative investments.When penny stock investing some available stocks to trade are included in the Pink sheet stocks and the OTCBB (Over the Counter Big Board). These penny stocks are most likely new companies rolling-out new products. Once they are established, these stocks will move on to one of the major markets. Stocks that trade in the major markets are more than likely stocks from companies that have little growth potential or are companies that are losing money in regards to penny stock investing. To summarize, most publicly traded companies that are now listed on one of the major stock exchanges (NASADAQ, AMEX, NYSE) were penny stocks listed on the Pink Sheets or Bulletin Board at one time. Please, however, be cautious to avoid investing mistakes when penny stock investing via the pink sheets and OTCBB.

There is a lot of information out there about penny investing and trading. However, finding the right guide to make good penny stock buys can be difficult. Therefore, being an amateur penny trader is not easy - it takes a lot of diligence and effort. It is best to go with a guide or strategy to help you become a better penny trader and investor.A consistently high volume of shares that are actually being traded is one thing that you should definitely look for in a penny stock investment. But be careful here, because it's possible to skew the results of average volume trading, go with the consistent volume to get a good idea of what the stock will provide as an acceptable rate of return. Also, make sure the liquidity of the penny stock is something you make a note to look at, how many people are selling and buying everyday?Stocks which appear in the major exchanges are required to possess certain financial status proofs. These proofs allow investors to know the true value of their investments, making it possible to make better and more well informed decisions. The stocks which appear in other markets do not carry the same degree of strong financial information, and can therefore be significantly riskier purchases.

This does not give you a consistent rate of return. In order to get an acceptable rate of return it is necessary for you to have consistency in the volume of shares you invest in. You should first look out at the liquidity because if there is no volume, you'll end up with dead money. This is where you have to sell of your shares at the bid, which will provide more selling pressure, resulting in lower price.Another form of speculation is penny stock trading. Penny stocks, as tradition states, are any stock that trades below five dollars. However, for the purpose of this article, any stock trading below one dollar is a true penny stock. Many people are attracted to penny stocks because of their low price and the amount of shares that can be purchased for less money than larger stocks. One major drawback of penny stocks is that they are thinly traded and can go weeks or months without a single trade being executed by market makers.

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