Making an investment in penny stocks provides traders with the chance to significantly increase their profits nevertheless, it also provides an equal chance to lose your trading capital fast. These five tips will help you lower the danger of one of the most chancy investment autos.

1. Penny Stocks are a penny for a reason. While we all dream about making an investment in the following Microsoft or the subsequent Home Depot, the reality is, the likelihood of you finding that once in 10 years success story are thin. These firms are either starting and got a shell company as it was less expensive than an IPO, or they just don’t have a business proposal pressing enough to explain investment banker’s money for an IPO. This does not make them a unprofitable investment, it should make you be practical about the type of company you are making an investment in.

2. Trading Volumes Look for a consistent large volume of shares being traded. Taking a look at the average volume can be deceiving. If ABC trades 1,000,000 shares today, and does not trade for the remainder of the week, the daily average will seem to be two hundred 000 shares. To get out and in at an OK rate of return, you want consistent volume. Also glance at the number of trades each day. Is it one insider selling or buying? Liquidity should be the very first thing to take a look at. If there is not any volume, you may finish up holding “dead money”, where the only possible way of selling shares is to dump at the bid, which should put more selling pressure, leading to an even lower sell price.

3. Does the company know how to make a profit? While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?

If your company knows the easy way to turn a profit, the company can use that cash to grow their business, which increases investor value. You’ve got to do a little research to find these firms, but when you do, you lower the chance of a loss of your capital, and increase the likelihood of a way higher return.

4. Have an exit and entry plan – and stick to it. Penny stocks are volitile. They may quickly move up, and move down just as fast. Remember, if you purchase a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A two cent decline leaves you with a twenty percent loss. Many stocks trade in this range on a regular basis. If your investment funds is $10 000, a twenty p.c. loss is a $2000 loss. Do this five times and you are out of cash. Keep your stops close. If you get stopped out, move on to the subsequent opportunity. The market is letting you know something, and whether you need to fess up or not, its customarily best to listen.

If your intention was to sell at $0.12 and it jumps to $0.13, either take the 30 percent gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.

5. How did you learn about the stock? Most folks find out about penny stocks thru a mail list. There are numerous glorious penny stock newsletters nonetheless, there are as many that are pumping and jettisoning. They, with insiders, will load up on shares, then start to pump the company to credulous newsletter customers. These customers buy while insiders are selling. Guess who wins here.

Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.

How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You’ll start to notice quickly if you have subscribed to a good newsletter or not.

One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you’ll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?

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Are you looking to outperform the market and optimize your profits but are not sure how to pick the right stocks? Has investing become a chore? Do you find yourself investing in hot stocks after they have made their big move? Would you like to learn how I increased my portfolio by over 400% in under 7 years? Do you want to discover how I have outperformed the market over the past 3 years by a margin of 5 to 1?

Do you detest Research? I am doing!

I’ve always wanted to find an investment technique that sounded right. An investing strategy in which I don’t have to know the subtleties of the market, foretell market trends or follow particular stocks. How is it possible to get the interior info of what’s hot before the remainder of the market knows? I can not. Nor do I really need to.Plus, I haven’t got that sort of time to commit to in-depth research. Like you, I have got a regular job that I want to give my time to. I’m not a stock trader ; nor do I want to spend all of my spare time on the PC doing research. Always following the stockmarket and getting stock quotes isn’t how I would like to spend my free time.

I Avoid Individual Stocks. They’re too untrustworthy!

Everybody wants to buy low and sell high. While millions of people do make money this way (and many millions loose money), I have found an easier and more effective way to use the market to my advantage. I do not trade in stocks. I do what I can to avoid individual stocks. And I consistently beat the market . . . month after month after month.

If not stocks, what is the alternative?

Like many people, I got heavily involved in the stock market in the mid to late Nineties. Tech stocks were going through the roof and I, like everybody else, wanted a part of the action. It seemed an easy way to make money. Everybody was getting rich. You did not need a special investment strategy to beat the market. During this time, I engrossed myself in the financial markets. I wanted to learn as much as I could without giving up my day job. I was trying to find the next best tech stock, IPOs and the occasional pre-IPO offering. But it was not until I discovered options trading that I discovered an investment strategy (The Yager Trading Strategy) that can work in any kind of market . . . Bull, Bear or stagnant.

That is right…OPTION trading!

And I am not talking about stock options or writing covered calls. Options trading…I started selling options on S&P futures, using different methods and trading strategies. And I did well. VERY well. Between July 1998 and January 2000 (a span of 18 months), from my option trading system, I turned an initial $25,000 investment into $167,615. That’s over 670% increase. And this was not paper money where you buy a stock and it has a certain listed value. This was real, taxed income. Profits collected on a monthly basis. Market fluctuations and volatility have diminished greatly since then…reducing the premiums. Those types of returns are no longer available, but the option trading strategy is still very sound. I still consistently beat the market. Even the years the DJIA, Nasdaq and S&P were all down, I posted more than a 22% gain.

Learn the option trading strategy or see how to make money with this strategy. I describe the strategy and show actual recent trades on YagerInvesting. The information is FREE. No subscription required. This is a method for risk capital only.

For the preceding twelve months ( May ’06 thru Apr ’07 ) this is how my method, The Yager Trading Technique , performed :

DJIA—–20.3%

NASDAQ—–14.7%

S & P 500—–17.3%

Yager Trading Strategy—–32.2%

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This era presents a huge quantity of chances to invest your money. But occasionally it’s hard to select the best investments that are acceptable for your situation. If you’ve an interest in investing your cash in stocks then this draft might be of help to you.

Below you’ll find ideas on how a bit of research can take the tension out of share investing and with some luck get large returns from your stock investment.

Find Investments That you have confidence in. The most effective way to pick the right stock is to analyze a stock company to find info that might or might not be fascinating. Consider only corporations, which have been trading in the general public market for a long period. These corporations frequently provide additional security and stability for a well looked after and branched out portfolio. Use the info you get from market citing to establish if you assume the particular company is a fit for you. Occasionally keep yourself recent on the corporations your making an investment in, because a company is stable now does not imply they will be around one or two years from now.

Search for Current Stories. A good way to find profit-making investments is by reading stories stories which will influence the value of a firms stock in which you’re going to invest your money. By updating yourself about the stockmarket you may be in contact with hot stories of public firms, which can keep you informed about what is happening in the market ( company’s stock value is going down or up ). This is particularly helpful if you get wind about major scandals or negative factors on time and can sell shares before the price falls. Or this can also allow you to invest before an approaching event that can bring about a spike or upwards trend too.

Keep an Eye On New Technologies. You should also read news about technological progress and fields like health care and biochemistry. New advancements in these fields can cause a sudden rise in stock prices, quickly earning you a nice profit. Learning about new and advanced technologies before they become well known, can potentially give you long term benefits and opportunities to engage your money in other investments. Don’t expect each and every new technology to cause an increase in stock value, but there is a better chance for making good profits from initial investments.

Invest for the Long Term. It is important to know about long term investments. Usually long term investments give more benefits than many short term investments. Many short-term investments also do well (scheduling your purchase and sell ahead of time can also save you some heartaches); long-term investments will add stability and security to your portfolio.

Find Yourself Some Good Help. With not too much trouble you will find many other people investing like you are. Ask around, there’s a good chance many of them use a stock recommendation service or a broker they’re happy with. In this case they’ll gladly recommend their services and if you’re new this may be a smart way to get started – this should also help you to avoid stock broker fraud as well.

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Your stock dealing rules are your cash. When you follow your rules you make money. However if you break your own securities trading rules the likeliest outcome is that you’ll lose money.

When you’ve a trustworthy set of securities dealing rules it’s really important to keep them under consideration. Here is one discipline that will harvest rewards. Read these rules before your day starts and also read the guidelines when your day ends.

Rule one : I must follow my rules.

Naturally if you develop a set of rules they are to be followed. It is human nature to want to vary or break rules and it takes discipline to continue to act in accordance with the established rules.

Rule two : I can don’t ever risk more than three percent of my total portfolio on any one stock trade.

There are several old traders.There are lots of bold traders. But there are never any old bold traders. Shielding your capital base is basic to successful stock exchange trading over time.

Rule 3: I will cut my losses at 5% to 15% when I am wrong without question.

Some traders have an even lower toleration for loss. The key point here is to have set points ( stop loss ) in the boundaries of your toleration for loss. Stay informed about the performance of you stock and stick to your stop-loss point.

Rule 4: Never set price targets.

This is a style that will allow me to get the most out of rising stocks. Simply let the profits run. Realistically, I can never pick tops. Never feel a stock has risen too high too quickly. Be willing to give back a good percentage of profits in the hope of much bigger profits.The big money is made from trading the really BIG moves that I can occasionally catch.

Rule 5: Master one style.

Keep on learning and improving at this one methodology of trading. Never jump from one trading style to another. Master one style instead of become average at implementing a few styles.

Rule 6: Let price and volume be my guides.

Never listen to any opinion about the stock market or individual stocks you are considering trading or are already trading. Everything is reflected in the price and volume.

Rule seven : Take all valid signals that show up.

Don’t make excuses. If an entry signal shows up you have no excuse not to take it.

Rule eight : Never trade from intra-day info.

There is always share price difference in the course of any trading day. Counting on this info for momentum trading can end up in some wrong calls.

Rule 9: Take time out.

Successful stock trading isn’t solely about trading. It’s also about emotional strength and physical fitness. Reduce the stress every day by taking time off the computer and working on other areas. A stressful trader will not make it in the long term.

Rule ten : Be a better than average trader.

In order to succeed in the stock market you don’t need to do anything exceptional. You simply need to not do what the average trader does. The average trader is inconsistent and undisciplined. Ask yourself every day, “Did I follow my method today?” If your answer is no then you are in trouble and it’s time to recommit yourself to your stock trading rules.

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There are many different stock markets in the US. In most circumstances, the main markets that you will hear of are the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) and the NASDAQ.

The markets are largely where folk and firms trade instruments. The market is the arena in which the players gather to trade.

The NY Stock Exchange has been about since 1792. It is found on Wall Street in NY Town . The NYSE is the biggest and best-known stock exchange in the country. It also has terribly harsh prerequisites for firms to join its lists. A company must be financially powerful and show evidence of being a business leader to join the NYSE. Corporations endeavor to be part of to this market, and even pay annual charges for membership.

When a brokerage describes itself as an affiliate of the NYSE it implies the firm has purchased a seat on the floor of the NYSE. This indicates that there’s basically a worker on the floor of the exchange purchasing and selling stock. This is a dear investment for a firm, costing well over one million greenbacks.

The North American Stock Exchange has similarities to the NYSE in that it conducts its trading on a trading floor. The floor is full of traders who purchase and sell stocks. The AMEX has been found in Manhattan since 1921. It is commonly known as a major exchange for not only stocks, but also options. You’ll have a tendency to find a touch trickier and smaller stocks mentioned on the AMEX, which operates under the NASDAQ-AMEX Market Group, a subsidiary of the nation’s organisation of Security Dealers.

Naz , or the nation’s organisation of Stocks Dealers Automated Quotations, is the youngest of the 3 major markets. It can also be the one you’ve heard the most about thru the news. It lists nearly each stock in the business, but it’s best famous for listing technology corporations. Actually it is where you’ll find many major technology stocks, including Microsoft and Intel. It started in 1971 and was the first OTC stock exchange. It links consumers and sellers thru a PC network.

Brokers and dealers will market the stocks by maintaning an inventory in their own accounts. They’re going to buy or sell when they receive an order from a backer. You’ll find that start up firms that are issuing stock in a preliminary public offering will probably list on the Naz .

When talking about purchasing stock, knowing where it’s possible to find particular types of stock is crucial. Each market frequently focuses on a touch different sorts of stocks.

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