Before you can learn about how to pick penny stocks, you need to learn about the market itself, about penny stocks and how they work. Penny stocks are incredibly popular in the stock market in general, and they are basically any stocks that cash in at $1 or less per share, although this price can vary. In the United States financial markets in particular, the term penny stocks commonly refers to any type of stock that is trading outside of the major exchanges. Penny stocks generally refer to those stocks and shares that are in small cap companies, and they generally have market caps under $500M and are often considered as being very speculative.
Penny stocks are very low priced and offer great potential for rapid growth, and this is one of the most major reasons that so many investors find interest in them. Penny stocks tend to have fewer shareholders, and therefore they will not trade as many shares per day as a larger company. This means that you also have a higher chance of having orders that are either partially filled or completely unfilled. There is a lack of liquidity and volatility with penny stocks, and this makes them much more vulnerable to manipulation. This refers to manipulation by management, market makers and third parties. So although you have a good chance of making a great profit with penny stocks, you also have a good chance of experiencing severe loss.
How to Pick Penny Stocks
When it comes to the matter of how to pick penny stocks, there are a few different factors that you need to take into consideration. For one, you always want to look for chart in day trades and then wait for half a day or so to see the trend of the stock. If it goes up you want to short it, and if it goes down you want to pick it at bottom. Harvesting large amounts of cash in the stock market is also one of the best ways to produce profit, and so if you can afford it, you should put in as much money as you can. Also remember that success in investing really comes from the growth in the value of your stocks, and so regardless of whether you have 100 shares of a $10 stock that appreciates 10%, or 1000 shares of a $1 stock that trades up 10%, you still will have made 10% on your investment.
If you are just getting started in stock trading, you want to be cautious when it comes to dealing with stocks near $1 or lower, because these are the ones that are most often abused and over-hyped. You want to avoid smaller companies, because they tend to feature high levels of volatility, low levels of liquidity, and limited available information, and these are all factors that can be difficult for the beginner to overcome.
As well when it comes to the issue of how to pick penny stocks, you want to make sure that you stay away from promoters. This is because promoters are a highly unethical group of people and their buying decision really has no basis in reality whatsoever. They will typically start a campaign of making telephone calls and sending thousands of emails, and the resulting interest that this creates will in turn drive up the stock prices even higher. Staying away from forums and news groups is also very important, and this is because when someone is talking about a stock in these venues, they are really only doing it for one reason, and that is to drive the price up.
Overall, the best method you can use when it comes to how to pick penny stocks is to combine your own research with professional advice. This is why making yourself as informed and educated as possible is so extremely important to your success in the stock market. Investigate companies before you put your money into them, and always get as much information as you possibly can. This includes everything from press releases to general media buzz, and this is important because again, the more you know, the better off you are going to be and the more profit you are going to produce.