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Penny Stocks – Turn Your Pennies Into Dollars Weve all heard about the investor how bragged about his 100% or 1000% return on a stock or about the guy who made it rich by investing in small caps Wholesale Jerseys , undiscovered stocks that made it big. In theory, it seems to be too easy. Invest in a couple of penny stocks, then sell them when they move up. Unfortunately, it is too easy. Too easy to lose money unless you know what to look for. First, lets have a look at what types of panies trade on the OTCBB or Pink Sheets. Stocks that no longer trade over $1 on the Nasdaq These include panies that fell from gre (Enron). While it is possible that they may see better days in the future, the odds are stked against them. Its usually best to avoid trading these stocks. If you feel that the temptation is too much, wait until the stock begins to rebound. If you try catching a falling knife, you will get hurt. New Start Ups Every year there are hundreds if not thousands of panies who decided to go public. Whether they need the money to expand their business, or are looking to ca out their equity, its a natural progression for a pany with a pelling story, and a great trk record to go public. While many of these panies will file for an IPO, many others will start off trading on the OTC BB as a penny stock Second, lets look at so tips to help the penny stock trader avoid making costly mistakes. Due Diligence Stocks listed on the Pink Sheets dont have to file annual or quarterly statents. This makes starting your due diligence difficult. Often, the rmation is sketchy at best, and typically, its biased. You ould expect a areholder to say good things about the pany. If the pany didnt have potential, they wouldnt be holding it. Or, they might be hoping to unload their ares and hope to talk you into buying. Stocks listed on the OTCBB file annual and quarterly statents. This provides so asure of financial suess. Youll find most penny stocks lose money, whether through managerial inpetence, or research and developnt. The key is to identify the panies whose managent has a record of consistently making money, or at the very least www.wholesalenflsportsstore.com , delivering on their business plan, and decreasing expenses. Penny Stock Newsletters Heres what I can tell you: be careful! Check the disclair for the amount the newsletter is being paid to carry the profile. Are they being paid in ca or in ares? Youll likely find a corelation beeen the number of ares they are being paid, and the rating on the hype ter. Does that an that you ould avoid any stock where the pany is paying IR professionals in ares? No. Just keep in mind that they are selling a story, and if they sell the story to other areholders, they will gain. This is not a problem if you get in early, but could be a problem if you arent able to jump in right away. Take a look at the trk record of the newsletter. Have they profiled winners? Do they state the fts, or state the hype? Do they also offer unpaid stock profiles? If they do, youll likely find that they do their own research in all panies, and are looking to ensure that they arent passing a weak stock your way just to pay the bills. If a pany is paying an IR professional money to profile a stock to its subscribers, ould you avoid it? Of course not. Think of the paynt as advertising. They are promoting the pany, and trying to get exposure. Like any pany, the only way to get exposure is through so thod of advertising. So dont dismiss a paid profile as hype. Keep it in the bk of your mind while you are reading the profile, but pay attention to the profile. You may find a diamond in the rough that no one has discovered. Volu If you want to make money, you have to be able to buy and sell enough ares to lock in your profit, or protect your capital. If ABC panys daily volu is only 500 ares a day, it may take you several days to aumulate a position worth taking. If there is bad news, who is going to buy your ares? If the volu is low, stay away. Its not worth it. If you feel that strongly about owning the pany, consider contting the pany directly and working out a deal. Buy Results, Not the Story If you buy the hype, odds are Wholesale NFL Jerseys , you will end up being the last one to own the ares, while everyone else has sold off their position. Look at a pany, take a look at what their business plan was, and confirm if they have followed through on that plan. Were they suessful? Did they bring a product to market on ti? Did the pany follow through on its quisition strategy in the manner they set out? The hype might get you a quick pop, however, unless you are watching your trading screen every second of the trading day, you will miss out. Size matters There are thousands upon thousands of penny stocks. The size of your position ould not be anymore than $2000 – $3000. While this may not seem like much, keep in mind that its not unusual for a $0.10 pany to drop to $0.05. Thats a 50% loss. If your position is $10 000, a 50% haircut leaves you with only $5000. Keep your losses to a minimum. If the pany has done well, and you are up, either take your profits off the table, or add to your position, and be sure to reset your stop loss so as to protect your previous profits. Capital preservation is the key to suessful trading. Have a plan before you buy. What are your reasons for buying. What is your exit strategy? Where is your stop loss? At what point will you take your profit? Write down these answers before you ple that buy order. Penny stock investing can be profitable. Rember, you are taking larger risks than you would if you were purchasing ares in a bank stock. That risk can be rewarded with returns that you cant get with a bank stock, or, it will be t with a large loss and a bad taste in your mouth for investing in penny stocks. Do your howork, dont believe the hype, and protect your capital. Larry Westfall is a retired expat in Thailand and loves penny stock advice