Penny Stock Tips

January 26th, 2009

If you are looking for a way to dramatically boost your profits than you may want to consider investing in penny stocks. Of course as with any investments you also stand to lose your pants. To avoid doing this, follow these simple penny stock tips.

The first tip is to remember that there is a reason that these stocks are called penny stocks. Most of these companies are either new companies just starting up or they simple do not have an outstanding business plan that would encourage a bank to loan them money. This does not mean that these are bad investments, what it does mean is that you should enter into this investment with your eyes open.

Next, when you are looking at penny stocks pay attention to the trading volumes. You want to invest with companies that have consistent and high volumes of shares being traded. Don’t look at the average volume because you can be mislead. You are going to need consistent volume to ensure that you are going to get an acceptable rate of return.

The next tip is to pay attention to whether or not the company is making profit. We all know that new companies lose money. The important issue is why are they losing money. Is it a manageable loss or will they have to seek more financing which will then destroy your shares?

Our fourth tip, always and we mean always have an entry and exit plan and stick to it. Part of the fun of penny stocks is that they are volatile. Part of the down side to penny stocks is that they are volatile. This means that if you buy a stock at ten cents and sell it at twelve you made a twenty percent return on your investment.

Our fifth tip has to do with how you go about finding worthy penny stocks. The majority of people find them through mailing lists. There are newsletters that deal specifically with penny stocks, some are excellent sources and some are dumping newsletters that are not going to offer you any significant help. So how are you going to figure out who is who? Subscribe to the newsletter and then keep track of the investments and answer the following questions: Were there legitimate opportunities to make money? Do they have a track record that shows they have provided subscriber beneficial opportunities? You will find out pretty quickly whether or not you are subscribed to a worthwhile newsletter.

Finally, smart penny stock investors know that you should never invest more than 20% of your overall portfolio. Remember the point of investing is to make money, and putting too much of your capital at risk increases your chances of losing that capital.

If you want to make money with penny stocks, follow these penny stock tips and you will be able to make safer investments that will provide a better opportunity for you to increase your capital.