How To Pick Stocks
How to Pick Stocks when Penny Stock Investing
Many new investors are interested in learning how to pick stocks when penny stock investing. Penny stocks are highly volatile so it takes due diligence when building a penny stock list. Penny stocks are considered over the counter stocks and are traded on the OTCBB and the Pink Sheet exchanges. Investors who would like to trade penny stocks must understand that they can be extremely dangerous no matter the experience level, and they can be especially dangerous for beginner investors. Todayís article will focus on how to pick stocks when investing in penny stocks.
The first item to discuss is the potential profitability of the company you are interested in when picking stocks. You must ask yourself if they are making any sizeable profits, and if their profit to debt ratio is favorable. You must also watch how progressive the debt payoffs have been. These factors will indicate the success level of financial management for that company.
When learning how to pick stocks you must also come up with a screening process. Before you even begin investing in stock, you must formulate a list of penny stocks that you will watch every day for a predetermined amount of time. You should note that penny stocks that are trading at their 52 week high or low have the potential to be huge gainers in a penny stock portfolio.
The most successful way to trade stock is to look for industry trends. The idea is to get ahead of the industry trends by finding companies that are on the edge of demand. If there is a high demand for gold, then people will go out and buy gold. This actually does not signify forward thinking because the public has already taken notice. You must look for and identify these hot stocks on your own before the public in order to make the greatest profit. This is very hard to do for a lot of investors because it requires a lot of time and research.
Another factor to take into consideration when buying stock is the tenure of the company. Find out how long they have been in business. It is usually safer to invest in more established companies, but that is not to say that investing in newer companies is a bad idea when you buy penny stocks. Just be sure to do your research on the company to be sure itís a wise move.
Another great way to find out how to pick stocks that you want to invest in is to look for those stocks that you have a personal interest in. You will find that you are more naturally inclined to study and choose the best stock picks because you are researching more heavily than you would be of stocks that donít interest you.
It is important to be patient when learning how to pick stocks. It takes a lot of time and due diligence, but once you have built your list you can then begin to omit the stocks that donít perform well as time passes. Just remember, that penny stocks are highly volatile meaning that the potential for high rewards carries with it the potential for high investment risk.