Penny Stocks are stocks that trade for under $5 a share by definition. However, when learning how to find penny stocks, many new investors will target stocks that trade under $1 per share. If you have less money to invest with, these types of stocks will allow you to get your feet wet. But keep in mind that there are still many risk factors at play. It is also very important to analyze the stocks that you think you might buy, beforehand. Here are some steps involved to help you find penny stocks:
First Tip To Find The Best Penny Stocks: Selecting the industry
It is very important to choose the right company or the industry for which you are looking to invest. It gives a clear idea about the money and the investment that needs to be taken care of. For example, if the marijuana industry is heating you may want to look for marijuana stocks to buy. If, say, the mining industry was cold and in a heavy downtrend, then you may want to stay away from most mining stocks.
Second Tip To Find The Best Penny Stocks: Security and Exchange Commission Website
It is important to check the Securities And Exchange Commission website to know about the details of the company. You’ll want to keep close attention on the company’s listing status (is it delisted or not) as well as on the frequency of corporate filings. If a company doesn’t report its financials often, it could be a sign of trouble.
However, if a company files things like Form 4’s at a frequent rate, it may be a good idea to look deeper. Form 4’s, for example, are filings made when there are insider trades. If there are insider trades for a penny stock that are recorded as “buys,” then it may be time to take a closer look at that stock.
Third Tip To Find The Best Penny Stocks: Are They Making Money?
It is very important to know about a company’s financial records. You’ll want to use them to see how the company is making money, its growth and where it could improve. It gives an idea about how the company is managing its income and growth. In some cases of penny stock earnings, companies will give guidance. If guidance is optimistic, then it’s likely that a penny stock could move higher. On the other hand, if guidance is pessimistic, it could signal a time to sell the stock.
Fourth Tip To Find The Best Penny Stocks: Select the Right Penny Stock Trade
Make sure to invest in a company that has a consistent and noticeable daily trading volume. Many people will equate this to a certain number of shares per day but on average, investors will focus on dollars traded per day. That penny stock dollar volume figure will differ depending on every trader’s unique situation. A minimum daily dollar volume average of $10,000 may be enough for someone trading with a few hundred dollars.
But for larger investors, that figure may not work at all. Timing is also important. Taking into account Tip #1, if a sector or industry is getting hit by selling, then it may not be opportune to buy a penny stock yet. On top of this, it’s important that the company is doing the right thing. If management just signed a massive deal, then it could be time to buy. Likewise, if a company is going bankrupt, you may be getting yourself into a risky situation.
Now, You’re Ready To Begin
So are these the only ways to look for penny stocks to buy? These give a rough idea about how to analyze the market and find penny stocks to trade. However, these aren’t the end all, be all. You should use this as a basis and then build your own strategy to find the best penny stocks. It is always suggested to have a little research before investing in any trade.
Stock prices and volume can change based on announcements or industry developments. At the end of the day, you want to make money with penny stocks so always keep that in mind.