How to Pick a Good Penny Stock

Posted on: August 29, 2013
successful penny stock ideas

If you want a list of hot penny stocks, one of the fastest ways is to sign up for a penny stock newsletter or to look at a stock trading forum. As soon as you see some penny stocks that you think might look good, it is time to do your research. Be skeptical of any penny stock you see until you do your research first on the company.

Using a penny stock newsletter can be an advantage but these newsletters are merely sending you tips and ideas. You must do your own due diligence to see if the tip is worth taking and following. Sometimes penny stocks can be victims of fraud and a pump and dump scheme.

You want to make sure that any penny stock you get into has a lot of liquidity. This means trading volume. If a penny stock has trading volume it means that it shouldn’t be too hard to sell it or buy it. A stock with low liquidity might be impossible to sell as there are not many buyers interested. Your penny stock asking price may just sit for a while until you go very low to be able to sell it, which means you may end up taking a very big loss.

This doesn’t mean that penny stock newsletter suggestions are bad. It just means that you need to study the market and practice a little before jumping into anything. Find a reputable newsletter to get ideas from. Test their suggestions on paper first before putting real money into the stocks. If you develop an understanding of how penny stocks and the market work first, you may be in for a great experience. Penny stocks can create huge profits quickly. Just make sure to always do your due diligence.

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