Investing in Penny Stocks

>Investing in penny stocks is challenging at the best of times but with all the chaos going on in the markets recently, it is becoming even more difficult to pick winning penny stocks. The fact is that investing in penny stocks is risky. The very nature of the penny stock market is volatility so every day, some players win big while others lose big. The key is to be on the winning side more than the losing side but how do you go about doing that?

What NOT to Do When Investing in Penny Stocks

Well, one thing is for sure. You don’t want to be like the masses of amateurs investing in penny stocks who subscribe to free newsletters and blindly invest their money in stocks recommended by the so-called expert publishing the list. This is a recipe for disaster for a number of reasons. First, the list owner likely isn’t investing in penny stocks that he recommends. He is likely making his money from paid subscriptions or from commissions on his members trading specific stocks. It is always better to take the advice from those actually investing in penny stocks themselves.

Second, he can’t possibly have the inside edge that is required to win while investing in penny stocks. If he is recommending so many stocks it isn’t likely that he knows all there is to know about the companies and the stock he is recommending. This is decidedly bad news as knowledge often translates to money when investing in penny stocks.

Investing in Penny Stocks the Smarter Way

Ok, so who can you turn to for good advice when investing in penny stocks? Well, how about the executives who actually run the company that you’re considering investing in? These corporate insiders have all of the knowledge and information to predict with a good degree of accuracy what is going to happen with the share price of their company. Of course, they can’t come out and blatantly tell the average investor when to buy or sell the company’s shares when investing in penny stocks but they certainly can and do send out strong ‘signals’ with their own insider trading activities.

That is all fine and good but let’s take things one step further for the average person interested in investing in penny stocks. What if we were to couple this insider trading data with other criteria? Let’s say something like this week’s fastest moving stocks or biggest gaining stocks? That way we would not only get the hottest stocks but we’d also get the signals that insiders are sending out regarding those stocks. This could be very powerful when investing in penny stocks, blue chips or anything in between.


Reported on Sep 15, 2011

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