Know about Penny Stocks

Any stock that is trading under the price of $5 per share can be called as a penny stock. These stocks are high risk to trade and usually move based on assumption. On the other hand, if you can find the right ones to trade they can be very money-making.

It is best to trade penny stocks on the OTCBB (Over the Counter Big Board) and the Pinksheet stocks. This is so because stocks that trade in the major markets (NYSE, NASDAQ, etc.) is most prone stocks from companies that are losing money or have little growth potential. What’s more, OTCBB and Pinksheet stocks are most possible newer companies developing a product and once they are established they will move to one of the major markets.

While selecting for a good penny stock to trade you should look for positive single day movers with higher than average volume. Make a list of 10-20 socks you find like this and then start looking at what the company does. Try to find companies that are developing new technology or a product that is innovative such that their competition will be smallest, if any, when their product is lunched or implemented.

Don't trust Message Board Opinions as all of the scammer and penny stocks manipulators go to try to get people to buy the stock they have already purchased.

What is important in stock market is to make your own homework. Know the profitability of the company. Keep an eye on the trends associated with this stock and its industry. Make a game plan and stick to it. Buy a stock only at the price you intended to buy it and sell it at the price you intended to sell it, always protecting yourself with a stop loss order to prevent you from losing everything if the price happens to crash.
Many companies send spam email about penny stocks. Don’t purchase a stock from them.

Don’t make large investment in penny stocks. Keep the amount of money limited-not more than 10% of your total trading cash-and look over every stock trading opportunity with a fine toothed comb. As you develop skill and experience as a stock trader you will come to know the fact that the deal of the century tends to come up several times a day. You just have to know how to find it.