| Investing in penny stocks provides traders with | | | | represents a 20% return on your investment. A |
| the opportunity to dramatically increase their | | | | 2 cent decline leaves you with a 20% loss. Many |
| profits, however, it also provides an equal | | | | stocks trade in this range on a daily basis. If your |
| opportunity to lose your trading capital quickly. | | | | investment capital is $10 000, a 20% loss is a |
| These 5 tips will help you lower the risk of one of | | | | $2000 loss. Do this 5 times and you're out of |
| the riskiest investment vehicles.1. Penny Stocks | | | | money. Keep your stops close. If you get |
| are a penny for a reason.While we all dream | | | | stopped out, move on to the next opportunity. |
| about investing in the next Microsoft or the next | | | | The market is telling you something, and whether |
| Home Depot, the truth is, the odds of you finding | | | | you want to admit it or not, its usually best to |
| that once in a decade success story are slim. | | | | listen.If your plan was to sell at $0.12 and it jumps |
| These companies are either starting out and | | | | to $0.13, either take the 30% gain, or better still, |
| purchased a shell company because it was | | | | place your stop at $0.12. Lock in your profits while |
| cheaper than an IPO, or they simply do not have | | | | not capping the upside potential.5. How did you |
| a business plan compelling enough to justify | | | | find out about the stock?Most people find out |
| investment banker's money for an IPO. This | | | | about penny stocks through a mailing list. There |
| doesn't make them a bad investment, but it | | | | are many excellent penny stock newsletters, |
| should make you be realistic about the kind of | | | | however, there are just as many who are |
| company that you are investing in.2. Trading | | | | pumping and dumping. They, along with insiders, |
| VolumesLook for a consistent high volume of | | | | will load up on shares, then begin to pump the |
| shares being traded. Looking at the average | | | | company to unsuspecting newsletter subscribers. |
| volume can be misleading. If ABC trades 1 million | | | | These subscribers buy while insiders are selling. |
| shares today, and doesn't trade for the rest of | | | | Guess who wins here.Not all newsletters are bad. |
| the week, the daily average will appear to be 200 | | | | Having worked in the industry for the last 8 |
| 000 shares. In order to get in and out at an | | | | years, I have seen my share of unscrupulous |
| acceptable rate of return, you need consistent | | | | companies and promoters. Some are paid in |
| volume. Also look at the number of trades per | | | | shares, sometimes in restricted shares (an |
| day. Is it 1 insider selling or buying? Liquidity should | | | | agreement whereby the shares cannot be sold |
| be the first thing to look at. If there is no volume, | | | | for a predetermined period of time), others in |
| you will end up holding "dead money", where the | | | | cash.How to spot the good companies from the |
| only way of selling shares is to dump at the bid, | | | | bad? Simply subscribe, and track the investments. |
| which will put more selling pressure, resulting in an | | | | Was there a legitimate opportunity to make |
| even lower sell price.3. Does the company know | | | | money? Do they have a track record of providing |
| how to make a profit?While its not unusual to see | | | | subscribers with great opportunities? You'll start to |
| a start up company run at a loss, its important to | | | | notice quickly if you have subscribed to a good |
| look at why they are losing money. Is it | | | | newsletter or not.One other tip I would offer to |
| manageable? Will they have to seek further | | | | you is not to invest more than 20% of your |
| financing (resulting in dilution of your shares) or will | | | | overall portfolio in penny stocks. You are investing |
| they have to seek a joint partnership that favors | | | | to make money and preserve capital to fight |
| the other company?If your company knows how | | | | another battle. If you put too much of your |
| to make a profit, the company can use that | | | | capital at risk, you increase the odds of losing |
| money to grow their business, which increases | | | | your capital. If that 20% grows, you'll have more |
| shareholder value. You have to do some research | | | | than enough money to make a healthy rate of |
| to find these companies, but when you do, you | | | | return. Penny stocks are risky to begin with, why |
| lower the risk of a loss of your capital, and | | | | put your money more at risk? Penny Stocks | |
| increase the odds of a much higher return.4. Have | | | | investment strategies for penny provides penny |
| an entry and exit plan - and stick to it.Penny | | | | stock traders with online trading and investment |
| stocks are volitile. They will quickly move up, and | | | | tips, online trading strategies and penny stock |
| move down just as quickly. Remember, if you | | | | picks. |
| buy a stock at $0.10 and sell it at $0.12, that | | | | |