This was found on www.Bobz.com and makes sense!
Only those with a tolerance for "high risk" should consider trading in penny stocks! Penny stocks are
volatile by nature. These stocks can swing in either direction rather quickly. On the upside, one can
quickly make alot of money in penny stocks! Penny stock companies range from either being new to
the public trading scene, to those who are "fallen giants". It must be remembered that it is the nature
of a company to make money and to expand. In penny stocks one is hoping to latch on to one of
these expanding/emerging companies at "rock bottom" prices. The more you "play" the penny stock
game, the more you will realize that the stock market in general is very much affected by news, either
good or bad. You will need to constantly monitor the news. Timing is a critical element when
investing in penny stocks. You don't want to find yourself in a situation where you invested $2,000
one day, and 2 days later thestock fell 50% -- which does happen! As a general rule, look to buying
these stocks at their 52-week low, or lower.
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Tip offs for stocks you may want to monitor can often be an increase of volume of trading.
Beware...before getting involved with any stock you should ascertain if the high volume is either a
"dumping" (selling) or a buying spree. New products such as that which Manhattan Scientifics
(MHTX) is working on (an extremely long life small battery) or the cure for cancer that many
biogenic companies, like Techniclone Corp (symbol: TCLN) are pursuing may be your golden
banana - should they succeed.
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Company Fundamentals are Important (or are they--see Tokyo Joe below):
Other things you want to constantly monitor are signs of poor company management, or a coming
reverse split in the stock. A reverse split, more times than not will not help your position (see info on
reverse splits at: www.stockdetective.com/reverse.asp. It is our position that a reverse stock split
amounts to government (S.E.C.) approved grand larceny....There are legitimate reasons for a
reverse stock split; such as when a company is selling its stock at $0.80 cents or so, and wants to
meet the minimum $1.00 bid price to be listed on the NASDAQ (to get more exposure). On the
other hand, we feel that companies that don't meet the NASDAQ minimum capital requirements,
and still do say a 1:10 up to 1:100 reverse stock split... have to be suspected as being "pump &
dump" companies (in it to rip capital off from investors)...We have included links where you can find
fundamental information on a company (make sure sales are good, inventory is low, and overall
assets are at least 2-3 times liability). There is also a link where you can find what insiders are doing
at the company. Insiders (company employees) often buy when things look good and sell before
things go bad. Also see reverse stock split study at:
www.napeague.com/F%20Reverse%20Splits.html
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Long Term Investing is Important:
Because penny stocks have been known to lose half their value - in some cases within a matter of
minutes - you should consider only making long-term investments in penny stocks. Play with only a
little money at first ($1,000 - $2,000). If you win, compound your way to success! Look for a
cheap on-line brokerage, because you will soon find that you have to pay more for penny stocks
than for a blue chip stock in broker fees; so it becomes most cost effective when buying penny
stocks to buy at least $1,000 worth at any one time. Some "players" sell their stock, or sell half of a
particular stock when it goes down 8-10% in value. This may be something you may want to
consider. Another frequent strategy is not to put all your money in 1 stock only.
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WHAT TO LOOK FOR:
The fast money in penny stocks is made on stocks that are "making a run up". Because one can buy
so many shares of penny stocks, occassionally a stock quickly makes a run upwards. Tip offs for
this is usually extremely high trading volume (15-50 mil shares traded or so). This gets tricky. You
will need "nerves of steel" to ride a running penny stock. That is because a running penny stock can
turn downwards very quickly. You will need to monitor it closely and decide when to exit/sell.
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BUYING PENNY STOCKS:
Get used to notbuying stocks for the asking price, unless you are about to lose a "priceless"
opportunity. At Gold Pennies there is a link to a java quote system (at Quote.com) where you can
actually see the "spread" (ask and bid). Try offering between the spread if you have time to kill. Wait
for the purchase price to come down to you. We nearly never suggest chasing an upwards moving
stock. Have patience...wait for it to come down to where you are comfortable.....Here is the java
quotes sytem.
At Gold Pennies, we purchase penny stocks on-line
via E*Trade. Many on-line brokers like DLJdirect
require you to call their 1-800 number, and wait on
hold for 20 min before placing your trade. At E*Trade
you can place a penny trade on-line almost
instantly.
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OVER THE COUNTER BULLETIN BOARD (OTCBB):
Read CBS Market Watch latest information about what it is, and what it isn't.
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CARDINAL RULES FOR INVESTING: DO NOT move on any of these so-called "hot tips" you
may read on these message boards, or that are sent to you via stock newsletters - until you first
check things out for yourself. Message board visitors have been known to plant false information - to
try to help out their own positions (declining stocks). Along with this rule goes the second and
equally important rule: if a stock broker cold calls you out of the blue with a "hot tip"....hang up the
phone!!!
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TWO APPROACHES (try both or mix):
(1) Fundamentals
(2) Tokyo Joe's "Day Trader" Approach"
TOKYO JOE (www.tokyojoe.com/:)
Says Joe: "First, put about half your money into something nice, safe and boring.
Then take the rest and buy stocks that have fallen well off their highs, particularly
thinly capitalized issues that have the potential to move quickly. When they do move,
sell. Immediately. Don't hold out for a huge score. Pocket a gain of a quarter point or
even a sixteenth of a point. Repeat as necessary until rich". Tokyo Joe is speaking
here about stocks that are selling at higher prices. Regarding penny stocks the
principal is about the same. Make a couple of hundred dollars and then move on
to the next stock until you are rich. Tokyo Joe claims to make over 6,000 percent
on his money in a year. |
