penny stock strategyAfter the mortgage blowout and resulting economic fallout of 2008 and subsequent years, a lot of money formerly available for trading disappeared. This became a great time to pick up undervalued stocks, including those that are labelled penny stocks. You could pick up many of these small cap and micro-cap companies at a very heavy discount.  Those deals are not as common as they were then, but still abundant.  WIth a good penny stock strategy, you can still make a fortune in the trade.

Penny stocks trade at less than $5 per share, many less than $1 per share.  They are very volatile and often make large moves in a short time.  This is where your penny stock strategy comes in!

A Different Strategy

To find the very best penny stock deals you need to follow a different strategy that that followed for traditional stock investments. Penny stocks are considered a riskier investment than traditional stocks that trade on the NYSE, the NASDAQ, AMEX and foreign stock exchanges. However, penny stock investors assume low risk trading penny stocks and make decent returns at the same time. This strategy works great and many investors continually profit from it.

Before I tell you the strategy, I need to be very clear about penny stock investing. First, researching penny stocks is very different from researching a traditional stock. In fact, it’s only been in the past decade that tools have become available designed specifically for penny stock trading. With penny stocks, knowing when to sell or buy a stock is more sensitive than for traditional stock because there isn’t a lot of room for movement. A $1.50 stock doesn’t have as much flexibility for up and down shifts as does a $47 stock.

Be A Good Penny Stock Detective

People who are good at picking profitable penny stocks don’t use the same techniques they would use to pick traditional stocks. Analysing fundamentals is far less important. In fact, fundamentals for a penny stock are usually basically worthless.

To be successful at penny stock investing you need to be a great detective.  You must be aware of current events and be able to relate events in one sector to impacts to stocks in another. Basically, this research is best done by people who make good investigators. If that doesn’t sound like you, then you may want to avoid penny stock trading.

Utilize Investing Expertise

Another option is to turn to a penny stock club or newsletter. Even if you are a good investigator, people who have been at this for years are good to have on your team.  When you look at a penny stock investing newsletter or service, they should actually offer methods for selecting penny stocks, mentoring on when to sell, as well as actual penny stock picks. If the resource is a newsletter expect to find it published weekly. If they offer a daily email alert even better. Often they will offer a free trial period. This is a great way to evaluate their service. You can even try investing in one or two of their penny stock picks.

I do want to mention that these services usually have a monthly fee. Some may discount the rate if you purchase a full year service. If anyone offers you a ‘free’ service just walk away. These free services are notorious for selling add-on products. Good penny stock picks do not come for free. Just think about it. Would you give your great stock picks away? It only dilutes the market. Good penny stock picks are worth the fee you pay to get them.