Buying Penny Stocks Online - How Do I Choose the Right Penny Stocks to Invest in Right Now?
Small cap stocks have always been where the action is
. Historically, they have had more upside potential and on average the small cap indexes have outperformed their larger counterparts. Why is that? The simplest explanation is that when you are small, you are usually more hungry and nimble as a company so your earnings continue on an upward spiral till you reach the next phase of growth or plateau. Are you interested in finding these smaller companies before they start their meteoric rise or better yet before they fizzle out? Of course you do. Otherwise you wouldn't be reading this article. Here are some pointers for making profitable penny stock trades:Emotions and Profits Don't MixThere are few things to keep in mind before you immerse yourself in the volatile trading waters of penny stocks. Their prices are subject to change very very quickly. Its important to check your emotions at the door (more easily said than done) before you jump in. One way to reducing the role emotions play in your trading decision is to establish an entry and exit price for your trade. Decide in advance, what you're willing to pay for a share of stock and what you will sell for once it reaches that price. If you do this in advance, you will have taken emotions out of the equation (to a certain degree).Investigate Before You InvestThe fact that these are penny stocks makes this rule even more applicable than for stocks that trade on major exchanges. The good news is that the best penny stocks will exhibit the characteristics of a good growth company in the financial statements. Through a basic knowledge of reading financial statements, you should be able to figure out whether the company has a good cash flow, good net income and stable assets for 3-5 years prior. If you don't know how to read financial statements, learn! Its a skill that'll make all the difference in eliminating bad stocks.Technical AnalysisA lot of penny stocks trade in more-or-less predictable patterns. These patterns can be determined after you have studied the trends of the stock over the past weeks and months. Once you narrow your stock research to less than 10 penny stocks after going through the numbers as suggested above you should start looking at the charts to see what a good entry and exit point would be. There are tools out there that will do the analysis or stock filtering for you but the final decision still rests in your hands.Online ResourcesWhile you shouldn't believe everything you read on the web, you should keep your eyes and ears open to whats happening out there. A lot of the people who buy/sell penny stocks get their information through paid newsletters and discuss their picks in forums. These places can be great to see pros and cons of certain company. Don't forget that a lot of the information online as in print can be biased. Keep an open mind and check your biases at the door. Follow any advice blindly and its a sure recipe for going broke.Buying Penny Stocks Online - How Do I Choose the Right Penny Stocks to Invest in Right Now?
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