Three Tips For Buying Penny Stocks…

| September 12, 2011 | 0 Comments

I love penny stocks… the opportunity for huge gains are always exciting.  I know a guy who made millions from just one little penny stock he was following.

Hearing stories like that always fuel my passion.

However, the potential for big gains also comes with the potential for big losses.  Like they say, “No Risk, No Reward.”  I hate losing money… especially with penny stock investments.

Unfortunately, nobody can guarantee 100% accuracy when buying penny stocks.  You’re always bound to have a loss or two in your portfolio.  However, there are a few things you can do to reduce your risk and improve your chances at finding big winners…

Without further delay, here are three tips for buying penny stocks.

Penny Stock Tip #1 – Research FIRST, Buy SECOND.

As simple as it sounds, it bears repeating.  Always do your own research on a penny stock… before you pull the trigger and buy the shares.  Look, the shares will still be trading there tomorrow, and next week, and next month (as long as it’s a real company).  So waiting a little bit to conduct your own research can’t hurt.

Besides, if your research on the company is good, then you have all the more confidence in buying the stock.  And if you find something bad… well at least you sidestepped a land mine.

Penny Stock Tip #2 – Patience Is A Virtue.

When it comes to patience, nowhere does it pay off more than with penny stocks.  Remember, one of the reasons the profit potential is so huge in penny stocks is because they’re often mispriced by the market.

These miss-pricings don’t happen overnight, nor do they work themselves out overnight.  So don’t go buying a good penny stock and get disappointed if it doesn’t move… or worse, goes down a bit.

For a stock to move higher, other investors need to see the value in the company.  That’s what drives the price higher… and that’s when you’ll start to see it move.  But this may take some time, so don’t expect miracles overnight!

Penny Stock Tip #3 – Always Have A Plan.

When you start buying penny stocks, you should always have a plan.  Have an idea in place about what you expect and where you might exit a trade.  Understand why you think a company is undervalued and what their performance should look like.

And most importantly, remain flexible.

For example, if you’re buying a penny stock because revenue growth is huge… but one quarter the numbers are disappointing, don’t be afraid to make a decision on the spot.  If it’s a one-time fluke or something the company can correct, keep hanging on.  However, if it’s a sign of bigger, longer term problems, then pull the ripcord and get out.

So there you have it, three tips to improve your results when buying penny stocks.  Now go make some money!

Until next time,

Brian Walker

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Category: Penny Stock Tips

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.