The advancement of today’s technology and economy has brought about many changes, advantages and disadvantages. In the world of stocks, promoters and scammers abound, lurking at every possible victim they could trap. With these threats, how could you find a penny stock that is not part of a scam?
Looking for a good penny stock to purchase can be likened to visiting a used car shop in search for a high-quality automobile. It’s possible to spot something that passes your criteria but you need to be very cautious before buying the car. You need to inspect it very carefully to ensure that you won’t end taking home a defective vehicle. The same is true with penny stocks. Here are some great ways to find good stocks that you can buy.
Do your research about penny stocks before actually buying
Common sense will tell you that before you do something, you need to learn at least the basic things about it. Some people might consider this step as a “no-brainer” but in reality, many smart people tend to forget this and jump hurriedly into buying stocks. Data must be scrutinized very carefully. Most investors will simply forego of the highly volatile shares. On the other hand, OTCBB of the “Over the Counter Bulletin Boards” have more SEC requirements than the Pink Sheets used in penny stocks trade. You must also examine these very carefully for cash flow, debt and earnings. A greater degree of transparency and responsibility are created in these reports.
Learn about penny shares and technical analysis
With penny stocks, charting the stock market can become a nightmare. Since the majority of the penny stocks are illiquid and lightly traded, the task can be difficult. The chart with volume and price might contain indicators and lines all over the place because there are some days that have little or no trading at all. On the other hand, days with high volume have extreme price movements. To help you manage this, there are two key factors that must be analyzed: the trend of price movement and the volume accumulation or distribution. A penny stock trader should attempt to time his purchases with huge accumulation of shares instead of looking at individual trades within the day. Money flow Index, On Balance Volume and the Accumulation and Distribution indicator are just a few volume tools that you can use to provide ideal methods in monitoring volume.
Rather than finding chart patterns in prices among individual days, the trader should look at a multi-month pattern to grasp a more accurate guess of the stock’s direction in the long run. Of course, short-term analysis may not be helpful because stocks with low liquidity will provide a poor purchase price.
Purchasing the Ideal Penny Stocks
With massive price movements, low-priced shares can attract investors but individuals should protect themselves from losing their investments by researching and inspecting SEC filings to reduce the risks. Another way is by using the long-range technical analysis on the stocks before finally buying your own.
How Do I Get Started?
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