Alex T: How do you pick penny stocks to invest in when there are thousands to choose from?
I mean, let’s say you’re really serious about investing and want to invest in a penny stock or two among other stocks. How would you choose them among the numerous options without reading every single prospectus or set of financial statements out there? Thanks
Answers and Views:
Answer by Henry Smith
I have to say that it is more risky to invest in penny stocks. But if you really want to, I suggest you learn about technical analysis. Through technical analysis and set stop price, you can control your risk.
hope it helps
Penny Stock comes under Higher risk and Higher return category of Stocks. Penny stocks attracts a lot traders due to their ability for higher investment gains,but because of their highly volatile nature and most unpredictable form of investment in the stock market.
Still if you are sure to invest in them you must know:
1) There are various companies which usually have no track record of solid financial performance due to which penny stocks can get manipulated.So have a look on that.
2)You must know which Penny stocks you have to keep away
a)stay away from companies that reflect negative EPS or earnings per share.
b)stay away from penny stocks whose average daily volume of is very less.
c)Have a look on the stock technicals, it should be in an uptrend and above support levels.
d)In addition, always check and read news concerning stocks.
Your question seems shows that you don’t have good experience in penny stocks.. So it will be complicated for you if i explain in business..
so here is the thing, usually penny stocks are known to be very cheap but at the same time very risky.. simply because expert traders are using it to fool other people to make huge profits.. these traders invest in the penny stock at the begining so to attract other investors who don’t have enough excperience… once the stock became of high value, they just sell off all of thier holdings sending the stock price to very low price.. which means other investors who didn’t predict the huge selling will lose most of their money..
But i realized that some penny stocks have great future.. i can’t recall the name right now, but i know this company is selling cloud computing equipment (TECH company), and it s stock is rocketing very very high more 350% than a year earlier..
i will try to check and add it to my explaination later
With investing you need to decide what return you want and what amount of risk you are prepared to take.
Once you know this, it is just a matter of researching until you find a suitable candidate. You are not looking for the best stock, you are looking for one or more that meet your criteria.
You need to know why your investment will increase in value (the story). You will need to work out what will indicate that the investment will not increase in value.
You hold the stock while you still believe in the story. You sell out if you start getting indications that the story will not come true.
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