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Daytrading Penny Stocks- What are penny stocks?
Daytrading penny stocks can reap very nice financial rewards if done wisely. Penny stocks are usually not meant to be held long term. The goal is to get in on dips and sell for a profit. Number 1 rule when daytrading penny stocks “Never fall in love with a stock” Again, these stocks are not meant to be held. They are very volatile and risky. Goal is to get in, make a profit and get out.
When daytrading penny stocks, you want to be sure that the particular stock has a high liquidity. This simply means that the stock trades throughout the day with high volume. If it doesn’t, you ill more than likely have problems selling that stock.
Before investing in any penny stock, do your research. Never invest in a penny stock without doing some research on the company first. This will keep the risks to a minimum (remember, penny stocks are risky- almost like gambling) Doing the proper research can help you minimize risk and maximize profit.
One site that I find very useful when doing my research is pinksheets.com. On this site, you can find the authorized and outstanding share floats, company news (past and present), the financials of the company, the reverse split history etc. It is very useful.
Now, you are probably wondering what should I research about a company when daytrading penny stocks. Volume is one of the aspects that you want to research. You want a stock that trades a few million shares a day. The stock should also have a small bid/ask spread. What is a bid/ask spread? The difference between the prices quoted for the stock. The bid is usually what you can purchase the stock for at a quick prices, the ask is what you can sell the stock for pretty quick usually. You don’t want a stock that has a larger bid/ask spread.
Researching the company is also so important. What products are they making? Check their balance sheets. How many times have they had reverse splits in the past? Visit the website of the company. Don’t invest in junk. If you don’t believe in the product, don’t buy the stock.
Know the authorized stock shares of the company. Know the outstanding shares. This is extremely important when daytrading penny stocks. What does this mean? Authorized stock is the amount of stock that a company is allowed to sell. Issued stocks are the number of shares that the company has sold. Outstanding stock represents the number of shares that have been sold and traded in the market.
Reading penny stock forums and penny stock newsletters can also be very informative. They help you find good penny stocks to play. You have to still do your own research though. On the forums, you have legitimate people posting their own research and facts about a penny stock; however, you also have your pumpers and bashers.
One of the forums that I like is at pennystockhideout.com. I have found alot of useful information there and found some lucrative penny stock picks. You have to learn who to trust though on the forum. It is important to remember that there are lots of people that will pump a stock for their own benefit. Maybe they are in the red for the stock and want to pump it so they can sell it (which could leave you to be what is known as a bag holder)
I hope this information helps. Remember, penny stock trading can be very financially rewarding as long as you play the game wisely. It is risky but can make you alot of money. It’s not a get rick quick scheme. As with anything else in life, daytrading penny stocks does require work and time. Hard work reaps rewards.
Happy trading to you
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