What You Need To Know When Trading Penny Stocks
I know it may seem like penny stocks should be traded completely differently then you would the “regular” stocks. But that really isn’t the case.
Some things that you do need to look at though before you start trading penny stocks. These are fundamental data, technical analysis, and news.
With fundamental data, you need to look at the statements from the companies. These statements include statement of cash flows, income statements, and balance sheets.
Follow each quarterly statement from the company. Notice whether their net income has steadily increased, decreased, or stayed at a current level. When looking at the balance sheet, notice debt to asset ratios. See if debts have increased while assets have decreased or vice versa.
If you are looking to find the penny stocks that are ready to explode then you are going to have to do some technical analysis. Pull up a chart!
You don’t need to put a bunch of indicators on the charts. Just learn about price action. If you look at chart, you can spot support and resistance lines, without any kind of help from indicators. When a penny stock really moves, its all shown on a chart.
But what may be the biggest factor in a rising penny stock is the news. It happens all the time. A small company comes from out of the clear blue sky and makes big news. If you don’t believe me, just think about when a new drug gets approved by the FDA, and the small time big pharmaceutical company is all of a sudden the toast of wall street.
Another thing to look at when it comes to penny stocks is the sector that the company is in and what kind of niche they are going for. Sometimes, its just a great idea. For example, take a look at eBay. When that company was first starting out do you think there were that many who people wanted to invest in an online auction site. Cut to billions of dollars of later, I’m sure many people are kicking themselves.
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