old or too young, or has to much or too little time to trade penny stocks would be painting far to broad of a
brush. The fact is that with the right game plan and strategy, pretty much anyone can find a way to make
Penny Stocks work for them. The key ingredient to success, however, is to find Un-biased sources for your
information and idea generation, which can be hard to do with Penny Stocks. Realistically speaking, low
priced shares should not make up a very large percentage of anyones portfolio. This ensures that profits
can grow large while losses will not. Taking into account your own goals, time horizons and of course,
cash flow, decide on a percentage and stick with it for while. Keep in mind that Penny Stocks require
plenty of attention and are typically only suitable for short to mid term trades at best.
Another requirement of Microcap trading is the ability to have patience but not too much patience. Although
things can and do happen very quickly with these volatile stocks and actions need to be taken regularly, the
ability to sit on something for a few months will undoubtedly be necessary. This makes Penny Stock
trading ideal for those who enjoy actively trading stocks, but don't want to be completely glued to their
computer screens. Daytrading Blue Chip stocks generally requires a lot of capital, a lot of time and a lot of
margin to make a substantial profit. These smaller, less active stocks move with much bigger percentage
swings and offer the opportunity to see larger profits without all the capital, time and headaches. If you use
your time wisely and exhibit patience with action, you can control risk more effectively as well.
Risk tolerance will be the major factor in determining the make up of your investment portfolio, and
Penny stocks should still be considered as being among the riskiest investments available. A lot of Penny
Stocks can be manipulated daily by outside forces, while a small amount can be fraudulent companies
themselves. You also have to watch out for reverse splits and issuance of new stock that can dilute the
value of each share. Excessive press releases from so called “third parties” touting the stock will also
need to be watched out for. You will find that a good bit of your time with Penny stocks will be in the
selection. Once you find a few winners, you will need to continue researching new companies in order to
have any long term success. All in all, the more you know about what your investing in, the more you can
cut the risk.
The final major hurdle to clear when trying to figure out if trading unlisted and other small cap stocks is
to assess the strength of your stomach. Penny stocks trade in places like the Over the Counter Bulletin
Board (OTC BB), Pink Sheets and the NASDAQ Small Cap market which are all among the most volatile
stock trading venues in the world. Some stocks can go from four cents to four dollars and back down
below a penny all while your on vacation. Others may do absolutely nothing while you stare at them all day.
Some maintain consistent volume for a decent period of time, and still see wild price swings. When a blue
chip stock sees a 10% move in one day, it tends to be a major story. When a penny stock moves 10% on
the day, we would consider it as basically unchanged. If you can realize that a stock should not be judged
by what price is it, but rather, it's current price in relation to it's share structure and historical analysis, then
you can calm your anxiety and keep a steady hand on the tiller.
Read all you can about penny stocks from the OTCBB website, pinksheets website and from the SEC.
Then, find out more about Penny Stocks by reading articles found here and elsewhere. Finally, be sure to
contact a broker or financial adviser so they can assess your particular situation. Let them know what your
goals are, and that you are interested in Penny stocks. Penny Stocks Weekly is not a registered broker or
financial adviser and does not offer individually tailored investment advise.
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