5 Tips for Investing in Penny Stocks

Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles.

1. Penny Stocks are a penny for a reason.

While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker's money for an IPO. This doesn't make them a bad investment, but it should make you be realistic about the kind of company that you are investing in.

One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks.

2. Trading Volumes

Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn't trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding "dead money", where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price.

3. Does the company know how to make a profit?

While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?

If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return.

4. Have an entry and exit plan - and stick to it.

Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you're out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen.

If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.

5. How did you find out about the stock?

Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here.

Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.

How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You'll start to notice quickly if you have subscribed to a good newsletter or not.

You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you'll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?

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Learning the Stock Market Game-How to Day Trade Stocks Online-Learn to Trade Stocks

These days there can be a lot of ways to make extra money. Buying and selling real estate, getting a second job or opening up a brick and mortar business operation are among the most popular options.

But many of those traditional business options might require a heavy upfront investment or start up capital on your part, as well as paying an increasingly high interest rate on any loans.

Day trading stocks online on the other hand can offer you freedom and easy liquidation of your funds. You don’t have to tie up your initial seed capital for months or years. You can buy and sell stocks on the same day and put your potential profits back into your cash account with out making a trip to the bank and waiting in a long line.

Another good possibility of day trading is that You don’t need a lot of money to start making money, unlike the majority of conventional businesses.

But here is the first thing you MUST DO if you want to aspire success in day trading : You have to PREPARE YOUR SELF, just like you would in order to accomplish goals in other areas of your life.

Day trading is similar to any other business operation in the sense that every successful venture owes its success to the method used to conduct its business. In other words your day trading results depend in large part on your strategies and method. So never attempt to trade stocks with out using and practicing clear strategies on how to buy and sell stocks.

At the end of the day online stock trading is all about picking the best stock opportunities and following your buy and sell signals with ease and simplicity. Once you learn to master your trading decisions, you can aspire to produce consistent profitable results.

Stress Free Traders helps day traders & investors choose stock trading opportunities in a practical way every day at http://www.StressFreeTraders.com

What if the Common Man Could not Invest in Stocks and Mutual Funds?

What if the average American could not invest in the stock market or buy mutual funds? What if only the wealthy could do this? Well, as more and more regulations are put on the financial investment industry and more and more minority shareholder lawsuits abound, we may see a time when the little guy gets shut out.

In fact many financial planners will not take to anyone who has less than 500,000 dollars to invest. Why? Well they feel it is not worth their time and with all the regulations in the financial planner industry, well, it I really isn’t and it is not worth the risk that they might lose their license as the SEC is quick to launch an investigation over any little complaint whether legitimate or not?

What can the little guy do? Well you can go down to Merrill Lynch and open up a brokerage account where some young stockbroker will read the latest stock picks on a 3 X 5 index card and tell you where your money should go, while they churn the ever-living-crap out of your account?

Why is this happening? Well, the SEC has it in for the little guy, as every 6-8 days they make another rule, causing more paper work and costs to little financial planners and Broker/Dealers forcing them to adjust their business model or quit business.

This means they cannot make money taking on small accounts under 500,000 and therefore, the little guys gets to go to the wire houses to get bent over; so my question to you is how do you like your SEC now? Think on it.

Lance Winslow, a retired entrepreneur, adventurer, modern day philosopher and perpetual tourist

Investment Opportunities In Small Cap Stocks

What is a small cap stock? First of all, "cap" is short for capitalization. Capitalization means the market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Some people define a small cap stock as one with a market cap of less than $1 billion. But I like to define them as ones with a market cap of under $500 million.

Over time, small cap stocks perform better than large cap stocks. The record is clear about that. However, in reading the commentary offered by investment pundits and Wall Street analysts there seems to be a heavy dose of skepticism about whether small stocks are appropriate for a significant percentage of an individual investor's portfolio.

One reason for this skepticism is risk. It is true that small cap stocks are much more volatile than their big cap brethren. So in that sense, there is more risk involved. But there is also an attitude among the investment elite that the individual investor is too unsophisticated to handle risk. Therefore, individuals must be protected from themselves by limiting their small cap investments to a small percentage of an overly diversified portfolio.

The last thing that Wall Street types want to do is empower you to make your own decisions. After all, if you're calling your own shots you don't need to pay for their advice, do you? And since Wall Street doesn't cover small stocks, it's in their best interest to steer you away from small stock investing.

But the truth of the matter is that it's the very reason that Wall Street doesn't want you to focus on small cap stocks that gives you an advantage. Analysts for big investment firms don't cover the little stocks. There are just too many of them and they are too small and illiquid for their big institutional clients to buy. And since many small stocks aren't adequately covered, they can be very inefficiently priced. That inefficiency offers a great opportunity to those who are willing to do the research to uncover hidden gems.

Super-star investor, Warren Buffett, has written, "Observing that the market was frequently efficient, the theorists went on to conclude incorrectly that the market was always efficient. The difference between the propositions is night and day."

Buffett is saying that smart investors can find opportunities in stocks that are priced below their value.

However, if you think you're going to get an edge by investing in Wall Mart, Microsoft, General Electric, and the like, you're just kidding yourself. Those stocks have been analyzed to death by teams of Wall Street analysts. What is known about them is already priced into the stock. There is no way you're going to be able to uncover information that is not already widely known by everyone else.

That's not true with small cap stocks. If you do your homework, you can find some really undervalued investment opportunities. You do have to manage your risk. But that's always the case in any investment you make. So don't let the financial media and Wall Street elites keep you from using the biggest advantage that you have over them -- the ability to find investment opportunities that they can't take advantage of. And you're going to be able to find those opportunities within the ranks of small cap stocks.

Larry Holmes invites you to visit http://www.smart-money-report.com/ Your common sense guide for financial and investment success.

How to Make a lot of Money on Stocks- Easy steps to follow and Real Results

I have been trying to make money on stocks a couple of years and I have found out that if you follow sertan rules you may get the money that you have expected in a less risk than usual.

I tried to buy stocks at these rules:

-Atleast doubled in value and

-Has going up fermly atleast for a 6 month of time

-Had a good graph

-I am selling the stock when it is going down for among 20%

I buyed the stock below tandberg data at a price of 8nkr and I invested 1800Nkr ($277 at a $ price of 6,5)

I sold the stock when it had going down from 22-18 Nkr.

My sale price was 18Nkr but a weak before I sold out from the companie the companie was splitted into to pieces.

TST(Tandberg Storage)Who has for now a value at 1000Nkr($154 and the main companie

TAD(Tandberg data) I sold out only the TAD piece and I am Not taking the value of the TST companie in my final sale price since I have not sold the stock yet.

I had now 4050Nkr ($623) in this stock

My earning was 2250kr ($2,643) at a period of among 8 months (The TST price is not calculated in this result since I have not sold it yet)

If I had sold the tst stocks at the moment 12november 2005. I have earned among 1000Nkr ($154)

So my final earning would than be 3250Nkr ($2,500) at a period of 2 years.

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