Purchasing a Hot Penny Stock
by:
BMA Editorial Team A
Hot penny stocks can be a high risk, high reward investment and are moving much more quickly than regular penny stocks. Don't forget however, that if you invest in the wrong penny stock it may actually end up being a high risk, low reward investment.
Hot penny stocks may go from $.01 to $3.00 within a matter of hours, and vice versa, making them an exciting and risky investment.
Hot penny stocks are a type of stock commonly referred to as OTC or Over-The-Counter stocks. These stocks are different than the stocks found on the everyday stock exchanges because of their cheap and risky nature.
Even though these types of stock have extremely high risk factors associated with them, this risk can be managed to some degree. By conducting an adequate amount of research using conventional methods, or recently developed software you can assess the risk you are taking by purchasing a particular penny stock, and make decisions based on factors presented.
Not only do penny stocks have big gains and losses, they are fun, easy to buy and sell and move very fast, making each minute of the trading experience an exciting one.
Currently, there are many internet sites that can point you to research and suggest stocks that are predicted to do well in the coming days and hours and can best benefit you. There are blogs, and message boards as well that can help point you in the right direction.
As you do learn about these hot penny stocks, and the returns they can yield, you should also remember, that you don't have to be an expert to trade these stocks. The average consumer can do well with penny stocks, if they get the expertise offered.
Here are a few tips, to help you get started in finding the penny stocks that can best profit you.
Find a real company that is reputable. There are companies out there that offer you penny stocks based on fake, scam based companies, which offer no legitimate return and lose you money.
Run a scan. A scan is a filtered search of stocks. You can set your scan to filter out stocks that have high volume, heavy price movement, or a number of other combinations of indicators that can help you identify hot penny stocks.
Search fundamentals. Fundamentals of a company often include a company's financial reports, growth estimations, new regulations and/or demographic and economic changes.
After narrowing down your hot penny stocks findings, a common suggestion is to find the current share structure of the stock or stocks you have decided to invest in. The share structure of a stock is a breakdown of the types of stocks the company has issued, and the number of each of those stocks they have.
It is also important to find out how many shares of that stock is currently on the market. That number can help you determine if that stock is going to be a hot one, or simply mediocre.
Investors of hot penny stocks also need to be aware of restricted shares and the options available to them within the realm of those shares. Restricted shares are usually held by industry and company insiders and are used in many instances as payment for a service.
After a year, these stocks are dumped back into the marketplace, and if investors and shareholders keep an eye on these restricted shares, they could make a decent profit, when they are dumped back into the share pot.
Before you start taking advantage of all your new-found knowledge about hot penny stocks, there is one piece of advice you should probably consider. Do not chase a stock.
Chasing a stock is when an investor hastily raises their buying price in order to get the shares they want. This is generally a very bad idea.
As you are chasing the stock, so are other investors, and when they get their preferred amount, they will drop out of the race.
As these investors drop out of the buying race, the prices will fall again, and you will be able to purchase the shares that you wanted at the original penny price, or very close to it.
Now that you have purchased your hot penny stocks, you just have to worry about selling them, which should be discussed as a completely separate topic all together.
About the Author:
Jack R. Landry has worked since the early 90s in the stock market as a broker selling stock. He recommends (http://www.AffordableStock.com) for penny stocks.
No. of Times this article has been viewed :
339
Date Published :
Nov 20 2009
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