Penny Stock Trading

Many people are attracted to penny stocks because of their potential to provide massive gains. However, many novice traders and investors often get involve in speculative investments without having a strategy set in advance.

People often look to buy hot penny stocks because of their low price and the ability to own large share amounts with only a small amount of capital. Penny stock buyers should know that trading strategies should be the same, regardless if you are buying Cisco Systems (NASDAQ:CSCO) or a mining stock on the OTCBB. The amount of capital is irrelevant, because you should have an entry and exit plan on every trade. Remember it doesn’t matter whether you invest 3k or 50k.

Please keep in mind that not just any trading concept will work. Sometimes having no plan might be just as good as having no plan at all. So here are some simple suggestions that should keep you out of trouble and hopefully be cornerstones in your thought process.

Always trade small until you achieve a certain comfort level. Being comfortable as an investor is being consistently profitable. So take your time, good ideas come around all the time. CNBC, the Wall St. Journal and various trading and penny stock newsletters have winning trades often. So don’t be afraid to miss one before you gain the necessary experience. Trust me other good ideas will come again.

Another common mistake made by traders and investors is using margin. In my opinion, trading on margin is not only extremely risky because you can actually lose more than you initially invested, but it also alters your mental psyche during the trade. So never put a stock like General Electric (NYSE:GE) on margin to buy a penny stock. No matter how good it sounds.

You should also look for solid companies. While it is not common for a company trading on the OTCBB to be profitable, you can look for other signs. Start with looking for companies with revenues or contracts. Especially companies that have aligned themselves with major corporations or governments. This often validates a companies prospects.

Finding liquid penny stocks can also be somewhat difficult. It is human nature to want to be first and buy a stock while everyone else is sleeping. But this is usually a losing game. A simple rule to use is to never invest more than half of the average dollar volume that a stock trades. For instance if a $1 stock only trades 10 thousand dollars in volume on average, don’t buy more 5 thousand dollars worth. Novice investors don’t realize that small orders can move some illiquid penny stock names 5% with ease. This is part of building an both an entry and exit strategy. Not using market orders is the best way to avoid getting a bad execution.

The last point is another common mistake to avoid. Don’t buy stocks that gap up. Many professional traders and hedge fund managers “fade” or counter trade gaps. Market makers have made fortunes short selling capitulation moves to the upside in penny stocks. Think about the last time you bought a gap up and the stock went down quickly. Did you ever stop to think of who was on the other end of the trade ? Why do you think these trading firms are in business ? To lose money. So if you really like a stock that gaps up, put a limit order in below and wait for it to retrace.

Lastly, do your research. We always tell you to be prepared. Having knowledge about a company is not a guarantee to a profit, but it surely eliminates bad investments. The internet has leveled the playing field between retail and institutions to some degree. So take the extra hour and simply browse the web for PR’s and financials. Remember, preparation is a key to avoiding rash decisions.

Penny Stocks – Why You Should Start Small is news brought to you by Penny Stock Explosion. We provide up to date current information for hot penny stocks and penny stocks which are primed for explosion.

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Micro Cap Stock Worth a Look

As we all know there is a ton of uncertainty in the global markets right now. While Goldman Sachs recently came out with a neutral outlook on Europe, they cut growth estimates in China. Other firms may follow suit as well. Are these recent estimate downgrades just part of the bottoming process, or is more bad news out there?  I think that we will see a lot of uncertainty until mid-term elections when we get some balance back in our government and put an end to what some are calling and “anti-capitalist regime.”

What we do know is that large amounts of speculative money was invested in China and in Chinese stocks. These investors were looking for massive gains too.  Recent losses overseas may cause the “hot” money to be a little less aggressive. As we all know it is easier to find hot penny stocks in a bull market. But this recent bottom cause penny stock traders to take a look at Chinese companies like Amico Games (OTCBB: AMCG) or NF Energy Savings (OTCBB:NFEC) which are at or near year lows? Will penny stock value buyers take a look at a domestic micro cap stock? There is a saying “That nobody rings a bell when the market bottoms”. However, history has shown us that it’s usually not wise to be a hero in the stock market.  The fact that the market slows in the summer makes finding hot penny stocks even tougher.

While it’s safe to say that rising Asian markets are good for the U.S markets, it doesn’t mean good values don’t still exist. So get a list of your favorite quality penny stocks together that have value and are trading off of their high.  I am considering buying a basket of these fallen names to spread risk. Keep in mind the goal is to be right, not to be first.

Will China Effect Small Caps and Penny Stocks? is news brought to you by Penny Stock Explosion. We provide up to date current information for hot penny stocks and penny stocks which are primed for explosion.

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Low Volume and Penny Stocks

You have probably heard the old saying, “Sell in May and go Away”. Art Cashin from UBS made it famous in the 2009 crash. As you know, many mutual funds and hedge fund managers vacation during the summer months while volume and liquidity dries up. Due to the lack of buyers, it becomes very difficult to stage sustained rallies.  Short sellers typically don’t like to short dull markets. It’s not very hard for sellers to gain control. Now how does this relate to penny stocks? As we know hot penny stocks move on retail buying. Now it’s safe to say that if we are in a dull to down market.

Even your most aggressive penny stock trader is going to hold back some of his ammo. While everyone always hopes for a summer small cap rally, it doesn’t always happen. For every hot stock like MOP Environmental Solutions (OTC.PK: MOPN) that moves, there is a cult stock like Cascadia Investments (OTC.PK: CDIV) that slows down a little bit. The difference between these two names is that the volume in MOPN has surged due to an event (BP contract) and CDIV has slowed purely due to a lack of interest.

So keep in mind that in low volume markets, penny stocks will breakout less often. However world events that can create huge gains still happen. This is more prevalent in the penny stock arena. Just try not to trade just for the sake of trading. Remember to pick your spots. The potential for massive gains is still there, just less frequently. Being bored is better than losing money.

Penny Stock Liquidity is news brought to you by Penny Stock Explosion. We provide up to date current information for hot penny stocks and penny stocks which are primed for explosion.

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Tesla Motors and the Electric Car Company

The much anticipated Tesla Motors IPO will begin trading on Tuesday. Goldman Sachs, Morgan Stanley, JP Morgan and Deutsche Bank are the lead underwriters. The offering has also increased in size due to demand for the shares. However, Tesla is the classic concept stock and has never turned a profit. Does that matter ? Probably not.

Generally concept stocks due exceptionally well in good markets, but tend to get destroyed in bear markets. For instance the solar stocks went down faster than the broader markets in the 2009 crash due to a constant lack of earning visibility and their concept status. In Tesla’s case, the shares are oversubscribed according to some IPO services and may trade at a 1 or 2 point premium on day one. Tesla’s electric cars sell for more than 100k before tax credits which differ from state to state. They have also sold only a little more than 1000 cars. Due to the hype surrounding the deal, fundamental analysis will probably fall on deaf ears in the first week of trading.

As always we try to link some of the hotter ideas in the broader markets to penny stocks on the OTCBB.  In this instance look for possible increased activity in Electric Car Company (OTCBB: ELCR) or Li-ion Motors Corp (OTCBB:LMCO). These companies specialize in electric car conversions and may see some sympathetic buying due to the interest in Tesla motors. Time and time again we have seen micro-cap stocks turn into hot penny stocks due interest coming into a larger company within the same space.  You don’t need to act yet. As a matter of fact you may not need to act at all. Just be ready. Massive gains in penny stocks are a lot easier to obtain if you have the right information and are prepared.

Tesla Motors IPO

Tesla IPO and OTC:ELCR is news brought to you by Penny Stock Explosion. We provide up to date current information for hot penny stocks and penny stocks which are primed for explosion.

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Penny Stock MOPN Cleaning Up BP’s Mess

Why else would we even subscribe to a penny stock newsletter?  When your average person on the street hears the word “penny stock” they automatically become disinterested.  When a real investor hears the word “penny stock” they automatically see dollar signs.

Not every penny stock is a winner and not every penny stock offers an opportunity.  The trick is to throw together a penny stock list of companies that have potential and then start narrowing down your results.

There is a lot of money to be made investing in penny stocks.  When was the last time that you looked on your screen and saw that Microsoft, inc (MSFT) or even Google (GOOG) has doubled? It just doesn’t happen with blue chip companies like it does with penny stocks.

MOPN 30 Day Chart

MOP Environmental Solutions, Inc. (MOPN) was virtually an unknown penny stock last week.  Friday after the close the company announced that they had received a purchase order from British Petroleum (BP) in order to assist in the clean up process in the Gulf of Mexico.  The stock is up 267% today so far.  It jumped from .08 to .35 earlier today after opening at .16.  Not bad for a days work.

This is a common occurrence in the world of penny stocks.  I see it happen everyday.  The key is to find the company before it happens.  This is what we do here at pennystockexplosion.com

Still not convinced you can make money with small cap stocks?

What I am about to tell you might shock you.

If you are not familiar with the Russell 2000 index, you should Google it.  The Russell 2000 tracks small cap stocks.  Over the past two years we have seen the low point in the markets occur during February and March of 2009.  I took a look at the Russell 2000, the S&P 500 and the Dow and compared their performance to date.  The Russell outperformed the Dow by a massive 71% and the S&P 500 by close to 40%.

I am sure that now you are a believer in penny stocks.  We will have some more relevant information coming soon.

Hot Penny Stock Anyone? is news brought to you by Penny Stock Explosion. We provide up to date current information for hot penny stocks and penny stocks which are primed for explosion.

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