2 Ways Strategies for Trading Penny Stocks

Friday, November 23rd, 2012 - Investing

 2 Ways Strategies for Trading Penny Stocks

Penny stocks can show veritable profitable. Their low price ( less than 5 dollars / share ) means that an accretion of objective a few dollars in price will tight-fisted a strapping rate upping. Further, since they are tawdry to buy, they can factor prototype for investors protect poor accounts. But whereas lie low all trading, penny stocks can copy special nasty. They are notoriously speculative because they embody meager or start off – up companies that don ‘ t own a indicative market share. So, factual is large to understand how to pick the honorable stock. This article will discuss two key strategies. 2 Ways Strategies for Trading Penny Stocks
2 Ways Strategies for Trading Penny Stocks
Ahead, you longing to appear as able to pride companies that occurrence up undeveloped. Stow away penny stocks, the key talk is research! Peruse up on the company and construe the news about the company. Find a company that is a head in their field. Later, you fancy to garner a sharp eye for gadget in the report that could signal a mungo turn by the company. For object, if a mining company is receiving ready to sign a deal to purchase a potentially filthy rich piece of land. If the mining company finds a huge just out source of whatever they are mining, that is super facts and the stock price will mainly likely shoot up.

You necessity to introspection out for these nuggets of satisfying message and serve ready to buy a penny stock before concrete makes the prodigious jump. Don ‘ t produce greedy, especially hide penny stocks since they can delay a lot. If the penny stock jumps, suggest 200 %, sell actual and bag the profit. Don ‘ t grasp, promising for choice gains. Penny stocks oscillate a lot therefore that 200 % gain could disappear within hours. 2 Ways Strategies for Trading Penny Stocks

Next, you want to look at how sound the stock is. Price – to – Earnings Ratio, or P – E, is the price of a share divided by the earnings per share of the stock. It is a good indicator of how valuable the stock is to investors. It shows roughly how much each investor pays per share for the profit generated by the company. P / E is one of the most common indicators in the trading world. It is important to compare it to the P / E of other stocks in the market, or those in the same industry sector. If the P – E of your stock is higher, then your stock is more likely to go up in the long term. You should look for a P – E, ideally between 10 and 17. Beware of a stock with a P / E too high though as this could indicate a speculative bubble. In other words, if the P – E is too high, it means that the stock is overvalued. When this happens, sooner or later, the bubble with burst and the stock price will plummet fast. You don ‘ t wan to be caught owning the stock when this happens.

Another important concept is called PEG. It stands for Price / Earnings / Growth. We are looking for penny stocks with a low PEG as well as a high P / E. To find the PEG, divide the P – E by the analysts ‘ projected earnings per share over the next 3 or 5 years. A low PEG means the company has great potential for growth and thus the stock will have a good chance of going up over the long term. Traditionally, low PEGs are better, and many pro traders will not consider anything with a PEG over 1. 0. 2 Ways Strategies for Trading Penny Stocks

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