Buying Penny Stocks Isn’t Complicated
These days getting great returns on your investment is possible without large sums of money and long investment horizons. This is when penny stock profits come to your aid. These are the stocks are usually priced at less than 5 dollars per share and are traded in OTC or pink sheets rather than fancy exchanges like the NASDAQ or NYSE. If you are looking for superlative gains of 75-250% in a smaller timeframe of a few months penny stocks are a good bet.
How do you day trade penny stocks? There are several rules you can follow to pick the best of the best microcap stocks.
1) It starts with the audited financial statements. Learn to look past the bottom line value alone. Trust is a big issue when you consider smaller firms especially when this industry is less regulated. You have to keep track of the growth story too. Knowing the factors for driving the growth of this company is important atleast in the short run.
2) Look at the people in management positions. Would you trust them with your money? Do you know what motivates them and have they been successful before? Are they motivated to excel and be profitable while making a difference?. These answers will help you figure out whether you are ready to buy penny stocks.
3) I hope you didn’t think you will not have to use Price/Earning ratios. This is one of the basic mantras of investing in the stock market. If you want to know whether the company is undervalued, fairly valued or overvalued, this value is your best bet. With some experience you will develop your own set of filters or ranges of acceptable PEs.
You should use the above pointers starting out. The economic outlook as a whole affects your buying decision. The trend is your friend. Know whether you are in a bear, bull or sideways market.