In todays market, you can get good returns without huge piles of money and multiple decades of investing. This is when penny stock profits come to your aid. These are the stocks are usually priced at less than 5 dollars per share and are traded in OTC or pink sheets rather than fancy exchanges like the NASDAQ or NYSE. These investments can yield superior gains of 50-300% within a smaller trading window like 3 months.
Whats the best way to daytrade penny stocks? There are several rules you can follow to pick the best of the best microcap stocks.
1) It starts with the audited financial statements. The profits are important but just looking at the final value on the bottom line is fraught with danger. You never know who to trust when it comes to the smaller companies that aren’t as well regulated as the larger firms on the bigger exchanges. You should also know why this company has been growing and whether there is room in this market. Know what the competitive advantage of the company is and whether they will be able to sustain it in the short term atleast.
2) Look at the people in management positions. What makes them good leaders? Do you know what motivates them and have they been successful before? Do they follow ethical practices and is their motive to serve the customer or merely drive up profits. These answers will help you figure out whether you are ready to buy penny stocks.
3) I hope you didn’t think you will not have to use Price/Earning ratios. This is one of the basic tenets of stock investing. If you want to know whether the company is undervalued, fairly valued or overvalued, this value is your best bet. With some experience you will develop your own set of filters or ranges of acceptable PEs.
You should use the above pointers starting out. When the time to buy the stock actually arrives you also have to consider the economy as a whole. You have to keep in mind how the market is trending – whether we’re in a bull market, a bear market or whether stocks are the indices are moving sideways.