Posted by forex at 9:20 AM
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1. Open an account with an online discount broker if you do not already have one. Make sure you choose a broker with low commissions. By shopping around you can find brokers that charge as little as $5 to $10 per trade.
2. Create a list of all your stock market holdings. Use that list to determine what percentage you want to devote to volatile but potentially rewarding penny stocks. It is best to limit your exposure to penny stocks, since those stocks can go down as quickly as they go up.
3. Watch the news for stories about mainstream companies that have fallen on hard times or been the subject of negative news. When negative events strike, shareholders sometimes overreact to the news, sending a formerly high-priced stock into penny stock territory. You might want to look for these opportunities, as well as investing in true penny stocks.
4. Read several financial publications and look for stocks that trade in the over-the-counter market. These stocks are listed separately from stocks on the NYSE and NASDAQ. While some penny stocks appear on the major indexes, the majority trade in the over-the-counter market. Make a list of stocks you are interested in and research them further.
5. Research each of the penny stocks you have identified. You can start your research by visiting the company's website and learning more about what they do and what sorts of products they make. Look for the investor relations department, and use the contact information there to request a copy of the annual report. Most companies trading for less than $1.00 a share will be operating at a loss, but you can look at the loss figures and see if they are narrowing over time.
6. Make a list of the penny stocks you want to invest in, along with the amount of money you want to devote to each one. Log on to your brokerage account and go to the trading menu. Enter the ticker symbol of each stock and the number of shares you want to buy. Review your order carefully before submitting it, and print out a copy of each trade confirmation for your records.
7. Set a mental price target for each stock and watch the stocks closely each day. According to the Motley Fool website's analysis of penny stocks, volatility is one of the hallmarks of these investments. Watching the stock closely will help you lock in a gain. For instance, if you buy a stock for 50 cents a share, you might set a mental price point of a dollar. This would double your money and give you funds to invest elsewhere.