Turning Penny Stocks Into Golden Opportunities

Trading penny stocks can be tricky, especially if you like to find them on your own. The good news is there are a whole range of websites that can help you spot and trade the best.

Trading penny stocks on your own can be risky even with direction from online resources. Any top trader will tell you in order to be as profitable as possible, you have to go beyond looking for solid companies and using technical analysis to enter and exit trades.

Screening out the mediocre penny stocks is the key to being a successful individual trader. The following concepts will steer you in the right direction.

Determine Who Owns the Lions Share of the Company

When management of a company represents a large chunk of shareholders, it may help prevent it from going under. As owners, theyre highly motivated to keep the company above water. On the other hand, if management/owners begin unloading stock, you may want to avoid it all together.

Its easy enough to find the details of company ownership. Most publicly traded companies are required to disclose this information in an 8K and/or Form 4 filed with the SEC.

Getting the Word Out ” The price of penny stocks are often affected as much by the publicity it receives as its fiscal success.

This isnt to imply an organization needs to post a news release every single day to garner constant attention. However, a company can only excite potential buyers by letting them know whats going on. And, it cant be a one-time event.

Volume Matters ” If a penny stock you buy doesnt have a steady volume of buyers, you may not be able to exit the position at a reasonable price.

If 500 shares of a penny stock trade hands on one day and then 500,000 shares trade hands the next, which is it going to be when it comes time to take a profit on the 100,000 shares you may own? Liquid penny stocks are consistently liquid.

When it comes to volume, you just need to make sure the pre-surge volume is respectable. High-volume breakouts often spawn new uptrends, so you shouldnt necessarily avoid them.

If you buy a penny stock without doing a little research, you just might find yourself on the losing end of a loser company. It may have been started on a whim, without a plan for growth, or a long-term patent may be close to expiring.

When you consider buying a penny stock, realize that these companies are in early stages of growth. You want to make sure it has a game plan for expansion or a product about to launch that will bring in profits.

Likewise, more than half of all stocks trade at a value under their IPO price within twelve months after their public offering sale. Thats not a problem for a true long-term investor, but it can make things challenging for a penny stock trader who wants to get in early shortly after an IPO. It can take a while for a new stock to settle in and start trading predictably.

A rule of thumb for buying penny stocks is to only buy those with an element of contextual history.

Apply these four simple concepts to your penny stock trading strategy, and enjoy success right off the bat.

These four elements are not meant to replace a good trading discipline and chart monitoring. Use them in conjunction with sound strategy and youre likely to improve your track record as a penny stock trader.

If you still have an appetite for information about penny stocks, The SmallCapNetwork.com site can continue feeding you. Just subscribe to its free newsletter and youll be privy to specific stock picks and trading advice.

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