Ron Kaye is an editor for Stock Investing Reports, an investment website that publishes articles, news, and reports, and shares information on undervalued penny stocks.
Investing and Trading in Penny stocks
If you ask anyone in the finance world what they think about investing or trading penny stocks, the answer that you will probably get will be: “Don’t do it. You will lose your money since 90% of penny stock companies are scams. penny stock companies just want to sell shares and are not interested in developing their businesses.” The truth is that investing or trading penny stocks is a very risky business. So here is the most important tip about penny stocks: Invest only money that you can afford to lose.
If penny stocks are so risky then, why do people invest in or trade them?
The answer is because you can make a lot of money in a short time if you know what you are doing.
If you are still reading and have decided that you want to trade penny stocks, you need the right tools and good advice to help you survive and even win some money.
Step # 1 – Finding the Right Penny Stock to Buy
To discover the right one stock, you will have to do some investigation, or Due Diligence. There are a lot of websites that will help you with your DD and you can find a list of useful ones at Stocks Reporter.
The following points will guide you in learning important information about a company in which you are interested in investing:
1. Share structure: AS (Shares Authorized) and OS (Outstanding Stock) and Float.
2. Transfer agent transparency
3. SEC filing
4. Financial track record
5. Competitive position in its industry
6. Business model
7. Earnings power
8. Valuation or the potential value of the company.
For example, when looking into share structure what you want to see is that there is no dilution. A good sign is when the company has maximized the OS and is close to AS. Watching Level 2 will also give you good indication if there is any dilution from the company. A good strategy is to follow insiders who know the company better than anyone else.
Step # 2 – Deciding When to Buy
After finding the penny stock that you plan to buy, you have to find your entry point and how to execute it the right way. Following the trading in that particular stock for a few days together with chart analyzing will give you a lot of valuable information. At this point it is highly recommended for anyone to learn some basic chart reading or at least let others analyze the chart for you. You can ask for help on many of the popular message boards that discuss stock trading and chart analyzing. An important tip about how to execute the trade in a penny stock is: Be very patient and always try to buy at the BID price.
Step # 3 – When to Sell or The Exit Strategy
The exit strategy is something very personal to different traders or investors.
It is very important to implement your strategy immediately after executing the buy order. In most cases, a good idea would be to set a sell order of 50% of your position at around 20%-30% PPS spike. Another 10%-20% rise of PPS and then sell another 50% of your current position and let the rest ride for a while. In general, your exit strategy should be very flexible and change with news, momentum, and volume. 90% of the time, though, you should sell at the ASK so it won’t affect the run.
TIP: Remember always to take profits.
Happy Trading
Ron Kaye
Stocks Reporter
- Related Videos
- Related Articles
- Ask / Related Q&A
- My Guide to Stock Investing
- Are You Interested In Stock Investing?
- Stock Investing - Tips You Can't Do Without
- What It Takes For Successful Stock Investing
- How To Make An Intelligent Stock Investment
- Learn to Trade Online: Sign Up for Free Stock Investing Course
- The Surefire Steps Towards Better Stock Investing
- Guide to Stock Investment for Beginners




Enjoy Your Retirement with the Help of Annuities
By: Tom Lustina | 01/01/2010Annuities come in all different shapes and sizes with each offering its consumers different advantages and disadvantages.
Choosing the Most Profitable Penny Stock Guides
By: Duane Atkinson | 01/01/2010There are a variety range| number} of different guides dedicated to wholly towards penny stocks and delivering rewarding picks in the market so all you've got to do is invest exactly in the stocks which they tell you to. Although it sounds too good to be true, the truth is this technology has been utilized by the major trading houses for years now but only in the near past have they become available to just about every day traders are smaller scale. if you have been inquisitive...
DO YOU ASPIRE TO BE A SUCCESSFUL INVESTOR IN CAPITAL MARKET?
By: DR.R.SRINIVASAN | 01/01/2010Securities are considered as Challenging as well as Rewarding. But Investing in securities requires skill and expertise and Carries the risk of loss.Hence Investor should be apparent about the investment objectives and realistically review the risk taking capacity. he should do his due diligence and home work before investing/ divesting any particular scrip and choose proper timing.
Looking ahead to 2010! December 31, 2009
By: Sy Harding | 31/12/2009Important historical patterns point to another market decline next year, but to an important multi-year low.
DO YOU NEED A FINANCIAL PLANNER?
By: Kevin F. Duffy CFP® CRPC® | 31/12/2009No matter how much money you make, it pays to keep on top of money coming in and going out. Even if you do a good job of that, there are important times in your life when talking with a professional adviser makes sense.
Buy Gold Bullion - Why Gold Bullion is the Best Way to Invest in Gold
By: Michiel Van Kets | 31/12/2009You can invest in gold in many ways - from mining stocks to exchange traded gold funds to buying gold coins, but here's why you should buy gold bullion to get the most out of your gold investment. Do you want to get into gold investing? Here's why buying gold bullion is the best way to invest in the yellow metal.
Year End Commodity & ETF Trading Signals
By: Carter Thompson | 31/12/2009Well, here we are with only hours left before the year is over. Virtually every investment is up other than the US dollar. Not much has changed since my last gold market trends report. But I have provided some interesting charts that show us what is possible in the coming weeks for the dollar, gold and natural gas. US Dollar Trend Analysis – Resistance Levels The dollar has shown some strength in the past month. It was a no brainer trade for 2009. You were either long gold or short the dolla
Make Money, be a Private Lender
By: Kyle Pavey | 30/12/2009The benefits of becoming a private lender are numerous and above all it allows you to grow your retirement savings more quickly than many other methods on the market today.
Penny Stocks - the Secrets to Success
By: Ron kaye | 09/11/2008 | InvestingInformation and timing are the most important things for an investor. These two aspects of investing become more important when penny stocks are concerned. Penny stocks are renowned for their “high risk, high reward,” as the adage goes, but then it takes a lot of effort on the part of the investor to know and understand which penny stocks would be worth the risk.
Everything You Ever Wanted to Know About Pricing Guns and Price Labels
By: Ron kaye | 15/06/2008 | Small BusinessPricing gun labels come in many different sizes and configurations to fill various functions. Although pricing gun labels have been showing up in ever increasing, varied usages, the most common applications for them are ages of pricing gun labels are for