Great financial tips to ensure you make more dollar

Penny Stocks – Turn Your Pennies Into Dollars

We’ve all heard about the investor how bragged about his 100% or 1000% return on a stock or about the guy who made it rich by investing in small caps, undiscovered stocks that made it big. In theory, it seems to be too easy. Invest in a couple of penny stocks, then sell them when they move up. Unfortunately, it is too easy. Too easy to lose money unless you know what to look for.

First, lets have a look at what types of companies trade on the OTC BB or Pink Sheets.

Stocks that no longer trade over $1 on the Nasdaq
These include companies that fell from grace (Enron). While it is possible that they may see better days in the future, the odds are stacked against them. Its usually best to avoid trading these stocks. If you feel that the temptation is too much, wait until the stock begins to rebound. If you try catching a falling knife, you will get hurt.

New Start Ups
Every year there are hundreds if not thousands of companies who decided to go public. Whether they need the money to expand their business, or are looking to cash out their equity, its a natural progression for a company with a compelling story, and a great track record to go public. While many of these companies will file for an IPO, many others will start off trading on the OTC BB as a penny stock

Second, lets look at some tips to help the penny stock trader avoid making costly mistakes.

Due Diligence
Stocks listed on the Pink Sheets don’t have to file annual or quarterly statements. This makes starting your due diligence difficult. Often, the information is sketchy at best, and typically, its biased. You should expect a shareholder to say good things about the company. If the company didn’t have potential, they wouldn’t be holding it. Or, they might be hoping to unload their shares and hope to talk you into buying.

Stocks listed on the OTC BB file annual and quarterly statements. This provides some measure of financial success. You’ll find most penny stocks lose money, whether through managerial incompetence, or research and development. The key is to identify the companies whose management has a record of consistently making money, or at the very least, delivering on their business plan, and decreasing expenses.

Penny Stock Newsletters
Being a writer for The Leading Source (http://www.1source4stocks.com) puts me in a biased position when speaking to penny stock newsletters. Here’s what I can tell you: be careful! Check the disclaimer for the amount the newsletter is being paid to carry the profile. Are they being paid in cash or in shares? You’ll likely find a corelation between the number of shares they are being paid, and the rating on the hype meter. Does that mean that you should avoid any stock where the company is paying IR professionals in shares? No. Just keep in mind that they are selling a story, and if they sell the story to other shareholders, they will gain. This is not a problem if you get in early, but could be a problem if you aren’t able to jump in right away.

Take a look at the track record of the newsletter. Have they profiled winners? Do they state the facts, or state the hype? Do they also offer unpaid stock profiles? If they do, you’ll likely find that they do their own research in all companies, and are looking to ensure that they aren’t passing a weak stock your way just to pay the bills.

If a company is paying an IR professional money to profile a stock to its subscribers, should you avoid it? Of course not. Think of the payment as advertising. They are promoting the company, and trying to get exposure. Like any company, the only way to get exposure is through some method of advertising. So dont dismiss a paid profile as hype. Keep it in the back of your mind while you are reading the profile, but pay attention to the profile. You may find a diamond in the rough that no one has discovered.

Volume
If you want to make money, you have to be able to buy and sell enough shares to lock in your profit, or protect your capital. If ABC company’s daily volume is only 500 shares a day, it may take you several days to accumulate a position worth taking. If there is bad news, who is going to buy your shares? If the volume is low, stay away. Its not worth it. If you feel that strongly about owning the company, consider contacting the company directly and working out a deal.

Buy Results, Not the Story
If you buy the hype, odds are, you will end up being the last one to own the shares, while everyone else has sold off their position. Look at a company, take a look at what their business plan was, and confirm if they have followed through on that plan. Were they successful? Did they bring a product to market on time? Did the company follow through on its acquisition strategy in the manner they set out? The hype might get you a quick pop, however, unless you are watching your trading screen every second of the trading day, you will miss out.

Size matters
There are thousands upon thousands of penny stocks. The size of your position should not be anymore than $2000 – $3000. While this may not seem like much, keep in mind that its not unusual for a $0.10 company to drop to $0.05. That’s a 50% loss. If your position is $10 000, a 50% haircut leaves you with only $5000. Keep your losses to a minimum. If the company has done well, and you are up, either take your profits off the table, or add to your position, and be sure to reset your stop loss so as to protect your previous profits. Capital preservation is the key to successful trading.

Have a plan before you buy. What are your reasons for buying. What is your exit strategy? Where is your stop loss? At what point will you take your profit? Write down these answers before you place that buy order.

Penny stock investing can be profitable. Remember, you are taking larger risks than you would if you were purchasing shares in a bank stock. That risk can be rewarded with returns that you cant get with a bank stock, or, it will be met with a large loss and a bad taste in your mouth for investing in penny stocks.

Do your homework, don’t believe the hype, and protect your capital.

Note: The Leading Source provides its subscribers with both paid and unpaid profiles. Follow those tips and you will watch your pennies grow into dollars.

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If the stocks start at just under a dollar, how can an investor hope to become rich in the end?

To get the most gains out of your penny stock investments, its important that you pick up information about certain companies before the news hits the primary media stream.As soon as word is generated about a company, the price of the penny stock soars until it no longer falls in the category of penny stocks at all. So how do you get this kind of information if the media isnt disseminating it to the public yet?

You must do your own due dilligence on the penny stock.As penny stocks are not followed by the main stream mutual funds you can usually get in before they do.
You have to become an investigator of sorts and figure out which companies have the best opportunity for you to profit from an investment of their penny stocks. Sometimes youll get wind of a small news item where stocks arent even mentioned and it gives you just enough information to leverage an investment of penny stock before the company starts heavily promoting their stocks in connection with the news.

In order to amass a fortune in penny stocks it does mean you are going to have to take big chances. . Some investors prefer to wait and see what will happen with a company before they buy stock.

This kind of approach nullifies the opportunity they have to take advantage of the low stock cost, because once investors know for sure that a company is on the rise, everyone will be scrambling for a share and the stock prices will rapidly climb.

One way to stay abreast of up-and-coming penny stock companies is to join one of the many penny stock advice forums on the Internet and watch what others have to say about the choices available to penny stock investors.
Always make sure you do your own investigation into the company as well, but having other investors with a like-minded attitude can help you learn what to look for before shelling out too much money as a junior.

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