Penny Stock Strategies
By Spencer Soros
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http://www.pennystockstrategies.com
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Why should the rich guys have all the fun? The small investor can seek
out huge returns too...if they know how.
Technical analysis that uses statistics for forecasting price fluctuations
is one approach. However, because it is difficult to track changes in
fractions of a penny, there simply isn’t enough data to be able to analyze.
Therefore, you have to keep an ear to the ground when you trade penny
stocks.
One of the biggest forces that drive penny stock prices is hype. Whether
it’s online in discussion forums or chats, or offline with publicity and
press, hype can cause swings in penny stock prices.
Are you looking to trade penny stocks to earn a good return on your money?
Penny stocks can be profitable for some, but it can also be a money-losing
experience.
What should you watch for when you trade penny stocks?
What are some strategies that professionals and amateurs use when dabbling
in the penny stock trade?
One technique that some experts who trade penny stocks implement is to
focus on a particular stock. Get to know the stock inside and out; that
is, get to know the company behind the stock, any news about that company,
and anything else that might affect the stock price. Target one stock,
listen to the buzz, and see how the stock responds. The louder the buzz
gets, the larger the potential for a big price swing.
Many people who trade penny stocks are small-time investors who don’t
have more than $1,000 of investment capital. These people trade penny
stocks because it gives them more shares for the money.
Where they might be able to buy dozens of shares in a major exchange
such as the New York Stock Exchange, they can buy hundreds when they trade
penny stocks. The potential for loss is big, however. It’s almost closer
to gambling than investing. The money used is strictly risk capital. Once
the money is gone, it’s gone.
Another subset of people that trade penny stocks are amateur investors
who use the buy and hold strategy. They purchase a stock and retain it
for long periods of time, hoping that the stock skyrockets at some point
in the future.
Unfortunately, this strategy hardly ever pays off in the way that the
investor had hoped. In the long-term, the stock could end up being completely
worthless.
Trading penny stocks can be a profitable, and even fun way to invest.
It certainly isn’t a traditional method of investing, and is unlike old
standbys such as bonds and mutual funds. However, trading penny stocks
isn’t for all people.
You should have a high tolerance for risk, a willingness to analyze every
minutiae of your penny stock, and some intestinal fortitude. Have fun
with penny stock trading, but don’t expect to stumble into the next WalMart
for pennies on the dollar.
And remember, as with anything else in life with high potential for gain
there is also high potential for loss. Do your homework, follow your rules,
and plan to prosper.
About the Author: Spencer Soros believes in helping the
small investor get the most bang for their buck. Why should the rich guys
have all the fun? Discover why he considers penny stock investing one
of the last frontiers for huge gains http://www.pennystockstrategies.com
Source: www.isnare.com
Published - December 2005
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