Buying Penny Stocks: How To Trade Penny Stock Wisely

Submitted by: Star Smith

Investing in penny stocks is often seen as a cheaper alternative to buying regularly traded stock. While it’s true that it’s easier to enter this market, this doesn’t mean that the risk is lower, to the contrary, penny stocks are considered quite volatile.

A penny stock is also known as a microcap (or nano) stock which normally trades for under $5 per share. These smaller stocks are often offered by upstart and struggling companies as a way to obtain quick cash flow for their business. This is not Coca Cola or Microsoft you’re investing in. These companies have not yet proved they are stable enough to stick around for the long haul.

Because of their low cost, you may be tempted to invest in several microcap stocks that look like a good bet. Keep in mind that you cannot just randomly pick a winning stock by your gut feeling. Just like with larger stocks, penny stock investing requires lots of research on the investor side, before putting down any money.

Online, there are several companies that provide stock analysis and lists of their current picks that are formulated according current market trends. It is almost impossible for the average person who has a full-time job to do proper stock analysis by themselves. The speculative nature of small cap stocks is somewhat like riding a roller coaster. Companies you invest in will have their ups and downs.

While you can try winging it yourself, you’ll have better success if you use expert analysis that shows you what are the most promising picks, and whether or not you should keep the stock you already own or sell. Knowing when to buy and when to sell are the key ingredients of successful stock trading. This is especially true when it comes to smaller stocks.

Because these stocks are so much cheaper to buy, you could typically buy 1,000 shares of stock at fifty cents per share for a cool $500. Indeed, this is a lot of shares and if your pick is a good one, you’ll make a pretty profit. However, if it’s a bad one, you’ll lose all of your money. Therefore, choosing the right stock analysis system is really important.

No matter which stock system you choose, you should still plan on losing money, because no system is 100% accurate all of the time. There are just too many variables that can happen to a company that will be completely unpredictable. Being a successful investor, means you want to have more winners than losers.

Every successful investor also knows not to put all of their money into one stock. You will need to spread out your risk. This means investing minimal amounts of money in several stocks and watching them carefully. A wise investor will narrow their picks down to companies that offer the least risk. Finding these companies will take time and patience.

If you are new to penny stock trading, you will find it extremely beneficial to do paper trading before jumping into the market with real money. You can learn how to use a trading system by making fake trades based on real data, and then keeping score of how well you do. Paper trading is a great way to know whether a particular system is right for you without risking any money.

Once you know what to look for in a small cap company, it’s very possible to earn a nice living investing in the future of small businesses. Make sure that you have reliable resources and training tools by your side so that you have the best possible chance at making substantial profits.

About the Author: Unbelievable! A robot that trades penny stocks better than many humans. Find out how you can use Marl the stock trading robot to earn a steady stream of profits. http://pennystocktradingmadeeasy.blogspot.com

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What Are Penny Stocks and Should I be Trading Penny Stocks?

Submitted by: Dan Callahan

In the world of financial services there are lots of shades of gray, actually green. Some items are clear and have a simple definition, while others defy being pigeon holed. Penny stocks are one of those very concepts. There is no accepted, official designation for the term "penny stocks" and which are and which are not will depend on exactly whom you ask. The SEC calls any stock under $5 a share a penny stock. Each brokerage firm and financial entity will have a different set of criteria for deciding whether or not a stock is "penny stock" or not.

In the easiest of terms, penny stocks are usually determined by three factors. These factors are (1) the price per share, (2) the market that the stock trades upon and (3) the market capitalization of the company from which the stock derives. Of course, there are some variations on each of these factors, and some brokerage firms will treat all stock from companies under a certain market cap as penny stock.

The Securities Exchange Commission will consider all stocks with a price per share of less than five dollars a penny stock; brokerage firms usually are far more lenient. Having one factor to qualify as a penny stock will not necessarily give a stock that determination, most have at least two and many qualify under all three.

Penny stocks are high risk, but can yield high rewards if you carefully research these investments. Make sure that you understand that it is easy to lose all of the money you have invested, but it is equally easy to make fast money with some smart planning and a lot of good fortune. Some brokers will not deal with penny stocks because they can be considered volatile and wildly unpredictable. They are usually unable or unwilling to do the necessary background research for these un-proven, small company-based stocks, and in many cases may consider them beneath them.

A small market cap usually relates to a small business, which unfortunately in this economic crisis period has a higher rate of total business failure. Although probably not a good idea for the beginning trader, or those with already tight budgets, penny stocks can be profitable in the right hands. Because they are usually from smaller and largely unproven companies, they can be purchased at bargain prices. If the company does suddenly have a growth surge, not only have you gotten in under the huge price increase, you have just made a large profit. Finding these profitable companies is the hard part. There are thousands of Penny Stocks to choose from, but how do you know which ones will become profitable. Just recently a company has developed a computer program that uses artificial intelligence to sift through the millions of pieces of data. So far the results have been phenomenal. They call it the Stock Trading Robot and it is the 1st commercially available stock trading robot of its kind. Check it out for yourself at the link below, just be very diligent and do your homework.

About the Author: Dan Calahan is an investor and entrepenuer. To find out more about the Stock Trading Robot mentioned in this article Click Here!

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Penny Stocks Versus More Expensive Stocks

Submitted by: Steven Penn

Penny stocks are not necessarily stocks that sell in the penny range; they are stocks that sell for less than $5 per share. This makes them an attractive investment for many people, but particularly those who are new to the trading game and do not want to risk a huge sum of money while they are learning the basics. That being said you should know that the risks are high and the potential for return is largely unpredictable. The following is meant to help you gain a better understanding of the difference between penny stocks and expensive stocks. By knowing the inner workings of each one you will be able to decide for yourself which option is best for an investor based on their level of experience and budget.

Expensive Stocks

On the other end of the scale, you have expensive stocks from major companies; these stocks range anywhere from $10 per stock to several hundred or even thousands of dollars. The reason these stocks are so much more expensive is usually based on the company behind the stock and the products or services they provide. Investors seek out proven companies that have a long track record of profits, good management and a host of other measurable variables. Penny stock companies rarely have this type of history to bank on. Instead, they operate on working to produce a new kind of service or bettering an already existing product. For example, a lot of penny stock companies are attacking new areas of science such as green energy and alternative energies. These younger stocks have the potential to reach enormous heights in a short period of time.

Penny Stocks

Because these companies often have such a small cap and also such a low price, penny stocks can rocket up 100% or more very quickly, which is something that larger companies stock cannot do. This is a reason why people invest in these stocks and also trade them heavily, because the return can potentially be gigantic. On the flip side when investing in penny stocks, we must be careful to do our own due diligence and research before investing so we know what we can expect from the company. That being said, penny stocks are more volatile because of small capitalization as well allowing the stock to shoot up quickly, but also suffer some quick drops.

Comparison

As you can see, there is a vast difference between penny stocks and traditional or more expensive stocks. There are perfectly valid reasons a person would decide to play with the penny stock market, including risking small amounts of money while shooting for instant wealth.

Penny stocks are also a great vehicle for learning how trading works and getting familiar with terms, the trading process and more. The swings of penny stocks also make them more fun for active investors and they are cheap enough that you do not have to bet the farm to enjoy them.

Conclusion

Penny stocks and more expensive stocks have many differences, but each can play a role in your investment portfolio.

About the Author: I work to bring you the information you need to get in on the latest developments in penny stock picks. What also helps achieve this is when you follow a trusted penny stock newsletter which you can sign up to receive via email.

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12 Basic Rules of Penny Stock Swing Trading

Many penny stock traders enjoy the idea of swing trading. This allows you to buy and follow the trend without watching through the day. These penny stock plays are normally three to five day plays sometimes longer. I have found through penny stock trading my top 12 rules for swing trading.

1. If the trade moves in your favor, carry it overnight--the odds favor follow-through. Expect to exit the next day around the objective point. An overnight gap presents an excellent opportunity to take profits. Concentrating on only one entry or one exit per day relieves the pressure. 

2. If your entry is correct, the market should move favorably almost immediately. It may come back to test and/or exceed your entry point a little, but that's OK. 

3. Do not carry a losing position overnight. Exit and play for better position the next day. 

4. A strong close indicates a strong opening the following day. 

5. If the market doesn't perform as expected, exit on the first reaction. 

6. If the market offers you a windfall of big profits, take them to the bank on the close. 

7. If you are long and the market closes flat, indicating a lower opening the following day, scratch or exit the trade. Play for better position the next day. 

8. It is always OK to scratch a trade! 

9. Use tight stops when swing trading (wider stops when trading trend). 

10. The goal always is to minimize risk and create "Freebies." 

11. When in doubt--get out! You have lost your road map and your game plan! 

12. When the trade isn't working, exit on the first reaction. 

Article was written by Mouser57 member of stockhideout.com Hot Penny Stocks

About the Author

rob rens 

Mouser57 member of stockhideout.com Penny Stocks, and stock message board (show bio)

Using Free Stock Quotes To Explore The Stock Market

Submitted by: Michelle Bery

The stock market can be complicated and confusing for all levels of experience. Those who are just beginning their foray into the stock market can find it to be overwhelming. In contrast, experienced traders can still often become stumped by a turn of events. The stock market is ever-fluctuating and often misunderstood. Beginners as well as the more experienced can be well-served by free stock quotes that can help guide the way through the market.

For those who have already spent a good deal of time operating in the stock market, they will surely attest to the benefits of free stock quotes. Free stock quotes can be used as a companion to a professional stock broker; it’s important to be well-educated on free stock quotes regardless of whether you are using the services of a professional. It’s always best to be as knowledgeable as possible – using free stock quotes - so that you can participate in the decision-making regarding your money.

Free stock quotes can easily be accessed on the Internet where you can research the history of a particular stock, the climactic changes it has experienced and future predicators to its success. Additionally, you have the opportunity to use free stock quotes to do some “practice run” trading to assess your stock market readiness. Because of this, free stock quotes for the beginner are absolutely essential.

Veterans also continue to rely on free stock quotes to reaffirm their instincts and plan their strategy. Professionals even, who have been in the business for many years, also turn to free stock quotes to help plot their course.

Free stock quotes also require a certain amount of knowledge to understand the information supplied. Beginners should take the time to educate themselves on free stock quotes so that they can best use the information to achieve success.

When using free stock quotes, beginners and veterans alike can vastly improve their chances for success in the stock market. The reason is simple: there are a myriad of reasons that a particular stock will perform well or perform poorly. Experts take all these factors into consideration and use it to supply free stock quotes. Those who seek out free stock quotes are giving themselves an enormous advantage for success.

When seeking out sites that offer free stock quotes, look first to other users. The Internet offers a vast resource for finding other investors just like you who have used free stock quotes. Be sure to ask around about free stock quotes!

About the Author: For easy to understand, in depth information about stocks visit our ezGuide 2 Stocks.

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How to Read Stock Quotes - Both Online and in the Newspaper

There are several different kinds of stock quotes. Technically, each stock has a set of quotes at any given time. These are the bid price and the ask price. More commonly, quotes are listed as the "last price," meaning the last price at which the stock was traded.

In the past, it was very difficult to find quotes. Many small investors had to hunt down a Wall Street Journal or New York Times business section in order to see how their investments were doing. Now, quotes are easy to find. This article is intended to help people find and read quotes, both in the newspaper and on the internet.

But First... Back to the Bid and Ask - Dual Stock Quotes

As previously mentioned, each stock has a pair of quotes, the bid and ask. This is because shares of stock aren't really traded between individuals, they go through intermediaries known as market makers or specialists. 

These Wall Street professionals profit by small differences in the bid and ask, which is known as the "spread." For example, a stock with a "last" price of $26.55 might have a bid of $26.52 and an ask of $26.58 - the bid is the price the market maker is willing to pay for the stock, and the ask is how much they're willing to sell it for.

Where to Find Stock Quotes Online

Quotes are easy to find online. Yahoo! Finance, MSN Money, TheStreet.com, Smartmoney.com, and a slew of other sites provide nearly up-to-the-minute quotes. 

It used to be that you had to wait until the following day's newspaper in order to get the quotes, but now sites like these make them available with only a 20 minute delay. In order to get real-time quotes, you'll have to subscribe to a special service.

Information Contained in Online Stock Quotes

Although the term "quotes" technically refers only to the trading price of a stock, people often use it to refer to a broader set of information. 

Typically, this includes the stock's change for the day (difference between the current price and the previous day's closing price), the day's range (low and high prices of the day), the 52-week range (the low and high prices for the year), the volume (number of shares traded so far that day), the average volume (the number of shares traded on an average day), market capitalization (total value of all the shares combined), EPS (earnings-per-share), P/E ratio (current price of the stock divided by its EPS), and dividend yield (annual divided divided by current price of the stock).

How to Read Quotes in The Wall Street Journal

The Wall Street Journal is probably the most classic source for quotes. A typical quote looks like this:

27.03 18.83 HrtldFnlUSA .36 1.5 19 z16164 24.75 -1.22

What does it all mean? 

Well, looking at the top of the column, we can see that the numbers are, in order, the 52-week high, 52-week low, the stock's name, dividend, dividend yield (1.5 means 1.5 percent), P/E ratio, volume (the "z" means "actual volume" - for most stocks, you have the multiply the number by 100), the closing price, and the net change from the previous day's closing price. 

In this case, "HrtldFnlUSA" is "Heartland Financial USA." While some papers and websites prefer to use a stock's ticker symbol, The Wall Street Journal uses the company's entire name, if it can fit.

Other good sources for quotes include the New York Times, Investor's Business Daily, and USA Today. For more in-depth information, consider the weekly newspaper, Baron's.

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How A Forex Or Stock Broker Can Help You Succeed

Submitted by: Gerald Mason

A Forex broker or Stock broker will be of great importance to you In every investor's life the "broker" is a figure of prime importance. It is through him that all securities transactions are handled; there is no way you can buy or sell stocks listed on any national exchange except through his services.

In the trade, he is known as a registered representative, a title that has now supplanted the old designation, "customer's man." He is a registered employee of a brokerage firm, preferably one which is a member of the New York Stock Exchange. He is not a broker as such, but is the liaison between you, the customer, and the firm's commission broker who executes orders on the exchange floor.

What He Does

The representative's job is to extend to investors all the services of his firm. He will, first of all, transmit your orders to buy or sell securities stocks or bonds, listed or unlisted (over-the-counter), domestic or foreign, in round lots, odd lots, or piecemeal through the Monthly Investment Plan. He will also buy or sell rights or warrants which, in simplest terms, are options to purchase a certain number of shares of a stock issue. He will arrange the purchase or sale of commodity futures grains, coffee, cotton, soybeans, whatever you are interested in.

He will place any type of order you specify: at the market, limit, stop. He will buy on margin or arrange a short sale.

He will be available for consultation on the merits of particular stocks or industrial groups, or for analysis of your entire portfolio. He will supply stock studies, newsletters, market analyses, and whatever other literature his firm issues. He will hold your securities for you in the firm's vault, collect your stock dividends or bond interest, and send you a periodic statement on any shares held for your ac¬count.

His fee: the standard commission you pay on the purchase or sale of securities. There are no other charges for his services (although you will pay interest, naturally, on money you borrow from him for a margin purchase).

What He Doesn't

Your representative will not and should not serve as a stock market tout or tipster. Unless you request him to, he will not volunteer advice on buying or selling. He will not choose for you between two stocks that seem equally attractive. He will not hustle you into the market and then sell you out; the fast turn-around is not his way of doing business.

What a Brokerage House Is Like

Brokerage houses are pretty much like offices everywhere, except for the presence of the fascinating paraphernalia of the market. The customers' room in the usual large brokerage house has a quotation board on one wall. The arrangement of items may vary, but basically they all offer the same data.

For each stock listed—and it is a pretty large board that shows much more than the leaders in any particular group— the quote board will indicate the present and past year's high and low, the previous day's opening, high, low, and closing prices, and the successive prices of the current day's sales.

There may also be a panel of commodity prices. Very likely there will be either a ticker machine or a projection of its tape on a screen which enlarges the figures sufficiently for them to be read across the room. There may also be a Dow-Jones ticker which taps out news, statistics, and whatever economic and financial information the extensive D-J organization may dig up.

Generally, chairs or benches are ranged in front of the quote board so that customers may take their ease while learning what the new day brings.

This is all for your convenience. Of course, you can get the same information simply by phoning your broker, but his office welcomes your visit.

What you do not see is your firm's research department, accounting department, and vault—though you can if you wish. The research department consists of a staff of securities analysts who study and report on the performance and prospects of various stocks. Many analysts hit the road frequently to examine companies firsthand.

Some specialize in oils, others in railroads or utilities. Much of their work is continuing study of one company after another, but they are also available for specific analyzes at a customer's request. (No one will do a special run-down on duPont to see whether you should buy 10 shares, however!)

The accounting department is, of course, responsible for keeping track of the thousands of transactions completed, and for maintaining records of each customer's position.

Many brokerage houses are also investment banking firms, prepared to share in underwriting new securities issued by companies seeking more capital. As will be explained in more detail further on, a company issuing stock does not sell directly to the public. It sells the entire issue to a syndicate of underwriters, which resells it at a small mark-up, or "spread," to the public.

In this case, no commission is charged because the broker's expenses and profit on the distribution are included in the premium you pay. (When 10.2 million common shares of Ford Motor Company were issued in 1956, the largest distribution in financial history, they were sold to a syndicate of more than 700 underwriters at $63 per share.

The price to the public was $64.50 per share or a spread of $1.50. As spreads go, this was very small—even though it meant a total of $15,300,000 to the syndicate.)

Brokerage houses may also "take a position" in a stock. This simply means that partners or officers, or the brokerage company itself, may follow their own advice and buy one stock or another. Since the subsequent performance of these stocks may depend on how many other people become interested in them, brokerage houses scrupulously report their holdings to the public.

As a customer, you can then decide whether Blank stock is a good buy because your smart broker has a piece, or whether his report on Blank is tinged with undue enthusiasm because he holds it.

If you are using a Forex broker he will be doing a similar job for you, but he will sell you the currency pairs you are interested in.

About the Author: Free Forex Software For You To Use: Download Free Forex Software http://www.greatpublications.com/forex.htm

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