Everybody has their own strategy when it comes to investing. For those of you who are just starting, some of my ideas may be useful for you, and for those of you who already have their own strategy, this could be equally as useful. I'll go over 7 points that here that somewhat simplify making money investing in penny stocks, but remember, there is no sure fire way, and these are just my opinions, and strategies that have worked for me. .....Let's get started!

1) I usually try to find companies that are trading in industries that are "hot" at the time.. For example in the late 90's, I spent a good portion of time looking at a variety of different .com companies and did quite well... Right now, my focus is quite a bit broader, but I look a lot at companies that are "green" meaning environmentally friendly, alternative energy, etc.

2) This applies to those of you that have no idea on how to find companies to look at in the first place... A good place to start is by subscribing to several "stock picking" websites, but I will throw out a word of caution, lots of these websites are quite shady by nature, so it is imperative that you do follow up research on every company (stock pick) you receive as detailed below. I have had good experiences with one site, theSmallCapAlert, it's a FREE site that seems to put out good companies, but that is a decision you will have to make on your own.

3) Financials, financials, financials.... Make sure you look at a companies financials. Remember, we are dabbling in the penny stock region, and most of them DO NOT have positive revenues, but what I generally look for is positive growth, so make sure you look at the last 4 quarters of financials for the company, and if there is positive growth that is generally a good sign that the company is headed in the right direction. We are trying to find companies here that we feel may graduate to a nationally recognized exchange one day and this is no east feat!

4) Look at the trading history for the company... I generally look at a one year chart to see how it has been trading... What I look for is a constant stream of volume, not speratic trading where one day it will trade 500,000 shares the nest day it will trade 6,000 shares and some days not at all... Stocks that trade like that are generally going in and out of promotion and only trade when some sort of promotion is going on... We want to be able to get out of our position whenever we want. Don't get me wrong, promotion isn't always a bad thing, it really just depends on what the motive is behind doing a promotion.

5) Call the company! Any real company will be glad to put you on with the CEO of the company. After all, you are buying a portion of their company; in my opinion, it's up to them to answer any and all questions you may have about the company in order for you to feel comfortable making an investment in their company.

6) BEWARE SPAM! If you receive an Email, Fax, or Direct mail piece from some place that you do not know, or did not subscribe to, DELETE it and/or throw it away. These kind of illegal promotions are ALWAYS crap.. Just a bunch of people with a lot of stock who want to sell it to you at an inflated price. The well used term for this is "Pump and Dump" and 99.9% of the time the information you receive is not verifiable in any way shape or form.

7) Never invest more than you can AFFORD to lose! Start small...TOO MANY people think that they are going to make tons upon tons of money and while this is very possible, it is also VERY POSSIBLE to lose tons and tons of money as well. A good rule of thumb that I like to use is to put a stop lose on my trades in case it goes down, this limits my lose. If the stock rises in value, I generally sell in intervals on the way up especially in a "day trade" scenario. Then on your next trade you have your profits to play with and you take your initial investment out of the equation.

There are many techniques when it comes to investing, these are just a few that I feel can help, especially for the new trader. And like I said before the site that I follow is pretty good in my opinion, and they seem to focus more on fully reporting companies that have a good story.

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MSmith said... @ July 14, 2008 at 10:27 PM

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