Trading in Penny Stocks – Shows you How

Penny PicksIf you are feeling let down by the traditional stock exchanges, then instead of giving up, perhaps you should be trading in Penny stocks? A Penny stock (traded at the OTC) is the new way to make money. The obvious advantages are that you donâ€˜t need a lot of money to trade in penny stocks neither do you have to wait an awful lot of time to book your profits.

Of course, not all penny stocks are good. Winnowing to separate the good from bad is a time consuming effort and one that also requires a fair bit of knowledge to understand the terminology used and the tricks adopted by companies and penny stock promoters.

Kavin Breheney of points out that economic downturn brings hardships not only to ordinary people; it also brings hardships for corporate entities. Companies go through hard times too and their shares that might once have been traded at (say) $120 might be finding it tough to find takers at even $2.50. However, not all shares that were once sold at premium rates can be considered as ´fallen angelsâ€˜. Some due to gross mismanagement are on their way to bankruptcy and even at $0.50 their penny shares are worthless. The trick lies in differentiating between the fallen angels and the real sinners.

John Stevenson also from adds that a good small cap stocks investor always has his or her ear to the ground. There is nothing stopping a company on the way to a total wipe-out, from receiving a last-minute cash infusion and therefore, a revival of fortunes. Whether in the traditional stock exchange or the OTCâ€˜s Penny Stocks, knowledge and factually correct news is money. Knowing what is happening or going to happen and interpreting it correctly with respect to the penny stock position translates into wealth.

Market researchers at advise that when the stocks of any company begin to slide, instead of jumping into it at an early stage, it would be better to wait until the slide is over. Once that happens, they suggest you should dig for any news of possible management change or anything else that might suggest that a revival is on the cards. The fact that the business owners have not given up on it is an indication that the stocks under 10 will rise albeit slowly. The penny stock might take a very long time in reaching its former glory but remember a rise from $0.50 to $1.25 is a whopping 250% increase in value and you can bank on that.

Kavin Breheney of also says that investors should use the face value of penny stock shares as one of the indicators and not the only indicator. Market researchers at say they had noticed price manipulations being done to increase or artificially decrease the value of shares. This is usually done when some deal or the other is being contemplated by the company.

Namrata Kerkar at suggests that investors should compares price per share against its official book value as reduced by the liability figure. If the current penny stock price is trading at a value that is below the figure the investor has arrived at (book value liability), then the penny stock is likely a good buy.

Market researchers at also advice that careful attention should be paid to the debt figures. If shares of a supposedly good company are currently at (say) $0.50 but it has a heavy debt burden, then the long-term chances of such a company are pretty low. It might be good for a ´quickieâ€˜ i.e. a quick buy and a quick sell to book profits but not an option for long term investment.

The best way to find the gems from amongst a lot of chaff is by subscribing to a Best Penny Stocks list put out by companies such as Of course, the services are not free and the subscription requires a payment. But if you follow the advice in the list, chances are, you will regularly come out smelling of roses (or any other perfume that pleases you).

Check out also for Penny Stock Newsletter and Stocks under 5

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