Dec 3, 2011

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Best Ways to Learn How to Research Penny Stocks

How to Research Penny Stocks

research penny stocksPenny stocks that are traded over the counter are a different animal when it comes to how to research penny stocks. Penny stocks are either traded over the counter or OTC Bulletin Board and pink sheets and there are literally thousands of penny stocks to choose from. So for a novice it can be overwhelming when it comes to how to research penny stocks. Sifting through these listings can be daunting especially if you do not know what you are looking for. However there are some services that do the leg work for clients and present to them the stocks that have the best chance of earning an investor money. If you do not want to pay a service to want to learn how to research penny stocks for yourself, here are a few tips. A word of caution, penny stock prices are manipulated by pump and dump schemes or market makers, so if you while researching you notice a sharp surge in volume, it is probably due to some type of market manipulation and ultimately can be very costly to an investor. Conversely, if you put in the time and effort you could see very nice rewards from penny stock trading.

Tips on How to Research Penny Stocks

First, according to the SEC, stocks that trade under $5 a share a considered penny stocks. Other investors take the term literally and seek out stocks that trade under a dollar on the OTC exchanges. Theoretically, both definitions are correct. Second, you can use what is called a stock screener to quickly find stocks that trade under the price point you elect, be it one dollar or five dollars. This will help you narrow down the playing field considerably. You can also, as stated earlier check the OTC BB and Pink sheet websites for many other penny stock listings. Alternatively, you can search for stocks by sector. For example, if you think that commodities are going to be the next big ticket you can narrow down your search in that way. Once you have compiled a list of stocks, you can research the company by visiting one of the many financial sites, many of which are free like Yahoo or Google. These are the basics when it comes to how to research penny stocks.

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