Penny Stocks are very low priced stocks and are often regarded are worthless. Many of the stock investing firms believe that investment into penny stocks is dangerous and should always be avoided. This is due to the reason that penny stock trade is a risky proposition for the investors and traders and has a less success rate. Penny stocks are risky because they have low trading volumes, high price volatility and danger of getting delisted from the stock exchange.
Moreover, these small companies stocks are not media friendly, so not many people know about these companies and stocks. These stocks move irrespective of share market movement and hence very difficult to predict. The application of investment ideas and strategies in penny stocks are altogether different from that of big companies stocks.
In spite the various rick and short comings, Penny stocks are always on the radar of the big investment firms and even the small investors. They have potential to provide huge returns to the shareholders in very quick time, which is almost impossible in case of other big stocks. It is assumed form these things that “Today’s blue chip was once a Penny Stock”.
All it needs is the identification that potential penny stock, which can be future’s blue chip. It is not that all easy because picking the right stock is like hitting the bull’s eye. Below are some of the special guidelines to choose the right penny stock, which can benefit you:
- Selecting Right Stock – Fundamental Analysis: Fundamental analysis ensures the analysis of company’s business, rather than the stock. The long term investment must be based on the fundamental research and analysis of the company. The major investor in stock market, Mr. Warren Buffet, believes only fundamental analysis for selection of his stock for investment. The fundamental analysis ensures various aspects of business, these are as below:
- Product: Product is an item that is offered for sale. It can be a service also. It needs to analyze that whether the product of company is well accepted in the market and also it must be a visible one. Many startups have been opened their business with new product or services that are not well recognized in the market. An investor must complete the whole analyses regarding the company’s product.
- Profitability: Profitability is a key for every business. If a business is doing well, the profit is ought to be healthy. An investor must look out for the companies who have shown profits in the past years and have potential to produce the same in future too. Along with profits, the debt level of the company is also a key consideration. Higher the debt more is the risk.
- Resilience; There are many factors of concern for any business. These factors can be like higher interest rates, inflation, rise in crude oil prices etc. The company must be efficient enough to withstand these external factors that affect the business.
- Management: It needs to be analyzed that whether the management is competent enough to manage the business. The promoters must have majority of the shareholding of the company, to ensure their vested interest into the business of the company.
- Selecting Right Stock – Technical Analysis: Another important instrument for selection of the right stock is the Technical Analysis. Technical analysis involves forecasting the stock price based on the graphs. Various graphs are explored like price movement chart on daily, weekly and monthly basis, trading volumes, combined price and volume chart etc. The major technical indicators used in this analysis are like moving averages, trend analysis, support and resistance, momentum, over bought and oversold levels, relative strength and some stock patterns like head and shoulders etc. This analysis basically enables to study the trend of the stock price and accordingly the target and stop loss levels are predicted.
The technical charting is also very helpful to study other various aspects like:
- Selecting Best stock among the Sector: All the stocks are compared in a single graph, showing their respective stock price movement over a said period of time. It is also possible to compare their movement chart with share market index movement. This help in analyzing the price movement in comparison with all the stocks of same sector and also with the index. This enables to pick the best stock in that industry.
- Timing of Trade: Various graphs patterns are analyzed to access the support and the resistance levels of the stock. Support level is where a particular stock finds support at lower level or demand of stock increases. Resistance is where the stocks finds selling pressure at higher levels or where supply is generated. It helps in spotting the buying and selling levels for the stock i.e. buying at support level and selling at resistance level.
Penny Stock Market Software
Stock market is full of uncertainties. There are several factors whether domestic or international, that affects the stock market movement. On any particular day, the stock market is looking positive and another day due to any uncertainty happening, the stock market can take opposite move.
Trading into penny stocks are more risky compared to midcap or large cap stocks. Penny stocks are stocks of small companies trading at very low price per share. Although penny, these are very risky trade due to many reasons like low capitalization, high volatility, low trading volumes etc.
Due to riskier proposition, traders and investors are advised to trade cautiously in penny stocks. One of the best alternate to handle the penny stock is the penny stock market software, specially designed for its trade. It is designed to assist the traders and investors in number of following ways:
- Choice of Stock: There is large number of penny stocks trading in the stock market. It is very difficult to choose the best out of the lot because these penny stocks have very less success ratio. On an average only one out of hundred penny stocks is successful in giving returns and rest just a nightmare for the traders. The software specifically designed for penny stocks help traders to find the best stock. They assist in providing with many important analyses like market data, stock price movement, its trading volumes, current news etc.
- Timing of Trade: After choosing the stock, the next important factor for trading or investing is the timing factor. Both buying and selling require accurate timing. The penny stocks have high volatile movement, any wrong footing may make trader to purchase the stock at premium or sell at discount. The software applications help in giving the accurate timing of trade by automating some of the processes that comes with trading.
Article 3: Penny Stock Market Software (Part 2)
Some of the more ways of making the penny stock trade easy and profitable by penny stock market software are:
1. Stock Price Movement: It is very important to keep a track of the stock price movement especially in case of penny stocks. These are very volatile trade and the software help traders to keep the track of all the penny stocks trade in the portfolio. The software is designed inculcating various technical aspects which alert the trader in case of any precarious stock movement. The best thing is that it not only alerts the trader but also provide recommendation to buy, sell or hold the stock position.
2. Tracking the Portfolio: The situation is more precarious when a trader holds multiple penny stocks in his portfolio. The percentage gain or loss in any single day is huge as penny stock has high price volatility. There can be cases where profits from all penny stocks in portfolio are offset by a major loss in any single stock of that same portfolio. The net worth remains the same but that single loss making stock needs immediate attention. The software help in tracking the penny stock portfolio. It provides various reports which are helpful to track how much you are making and monitor where everything is going.
- Monitoring Trading Volumes: The penny stocks generally trade on very thin volumes. The penny stocks are easily prone to speculations and scams, the major practice is the pump and dump scheme. A trader or investor of penny stock need to be cautious of such unfair trading practice by large brokerage firms. The penny stock market software application monitors the trading volumes of the penny stocks in the portfolio. It helps in alerting the user in case of any fluctuation in stock trading volumes.
Penny Stocks – Tips to pick for Maximum Profits
Penny stocks have a hidden potential of providing huge profits to investor and traders. The potential is hidden because you have to choose the best penny stock out of thousands of them trading on the stock exchange. The average success rate of the penny stock is quite low and that is the reason these are a risky bet. The penny stock movement is high in percentage terms and is irrespective of the stock market movement. There are special tips for the penny stock traders and investors to pick the right penny stock for them to minimize the risk and maximize their profits.
The special tips are as follows:
- Get the Tip from Right Place: There are large numbers of sources of getting the stock tips, especially in case of penny stock. Investor must be cautious and make sure the source of getting the recommendation must be authentic. The risk is so huge that any wrong trade into penny stock may ruin the whole investment. There are many paid newsletters and websites giving premium tips having long history of producing the winners.
- Avoid Scam blogs: The Penny stocks are always on the radar of scammers and fraudsters. Investor or trader is advised to avoid reading the blogs on penny stocks. These blogs are generally the source of misguiding the general public. False statements are published to attract buying of masses and artificially inflate the stock price.
- Do not Listen to Promoter: Promoters of these small companies need funds for expansion of their business. Quite often it is observed, the promoters of the company providing the misleading and false positive statements. Various fake press releases and false statements and commitments on company’s website are commonly practiced. It is done to attract public confidence and artificially inflate stock price, hence trapping the small investor to sell them at higher prices.
Article 5: Top Penny Stocks Tips
Stock market investment or trading is always difficult as it is not easy to understand stock market moves. It is even more difficult when it comes to penny stock trade. They are more risky proposition compared to small cap and large cap stocks. Penny stocks have different nature and their price move is not correlated to index. That is the reason, investor need to be bit cautious and need some special trading tips to minimize the risk factor and maximize the profits.
The 3 top penny stocks tips are as follows:
- Never make an overnight position: The penny stocks are highly volatile stocks. The stock price movement is so volatile that it can touch an upper or lower circuit of 20% in a day. Traders are advised to strictly cut down their holding the same day and not to carry any buying position for the next day. The penny stocks are mostly news driven stocks. Any news, positive or negative can easily make the stock to touch the circuit on either direction.
- Penny Stock Day Trading: Most of the traders trade the penny stock on intraday basis and had made lot of money. These penny stocks are low priced but tend to show huge percentage move either side. Day traders can both buy or short sell the stock on intraday basis. There are many paid premium newsletters recommending the stocks that have past history of producing winners.
- Use Stop Loss to Minimize Loss: The biggest risk in the penny stock trade is they are highly volatile. They show wide fluctuations in stock price on either direction. It is advised that the traders must use stop loss while trading. While using stop loss, it must be ensured that risk to reward ratio should be in favor of the trader.