Everyone seems to have a great investment story. How many times have you heard someone talking about how they found a great investment where they purchased shares of this new up and coming company for under $1.00/share and watched its price soar through the roof? How did they identify these attractive opportunities? Did they use a penny stock alerts service or did they find it on their own? The allure of finding the best penny stocks is clear but finding the best penny stocks to purchase from a risk perspective is not. In this article we present 5 keys in identifying winning penny stock alerts.
Penny Stock Alerts – What Are Penny Stocks?
Penny stocks are stocks that typically trade below $5 a share and do not trade on an organized stock exchange. These low-priced stocks tend to trade over-the-counter (OTC) and are sometimes referred to as pink-sheet stocks. These investments are inherently risky, make no bones about it. Many of the companies are not registered with the SEC and do not release earnings or key company news to the public. However, some of these companies actually do and grow to become great companies. The key is to find the best trading opportunity for these stocks. Here’s how some use penny stock alerts to identify the winners:
Penny Stock Alerts 1 – How To Find Attractive Candidates
Many of the old-school penny stock pickers use manual technical analysis in trying to identify attractive penny stock candidates. While the technical analysis portion is solid, the manual part of the process can be extremely time-consuming. Enter in penny stock alerts.
An excellent penny stock alerts service takes the manual nature of identifying the best penny stock candidates and applies various algorithms to constantly provide the best of the best on a real time basis. Check out our current list by clicking on the chart.
Penny Stock Alerts 2 – Focus on High Volume Penny Stocks
When choosing between various high quality penny stock alerts pay very close attention to volume. By volume I’m specifically referring to daily trade volume. A good rule of thumb to follow is to only consider penny stocks that trade a minimum of 100,000 shares a day. When you start dipping below that 100k figure, liquidity tends to become a bigger concern.
Penny Stock Alerts 3 – Don’t Believe The Hype
Many penny stocks become promoted at one point or another. A pump-and-dump strategy is often used by unscrupulous companies looking to make a quick buck off of penny stocks. This practice is illegal. These promotions often come with messages like “this stock will be the next Apple” or other similar hyperbolic messages. In general I’d stay away from such penny stocks, at the very least until the promotion dies down. Avoid the hype machine and focus on the core candidates the penny stock service identifies.
Penny Stock Alerts 4 – Avoid Taking Large Positions
You really need to be careful in sizing your trades. The last thing you want to do is be in a position where you are making up a high percentage of the trading volume in a name and you need to exit for one reason or another. In this scenario you are bound to take the stock down in trying to exit your position, no bueno! As a general rule of thumb try to limit the size of your position to under 10% of the average daily traded volume to reduce the potential impact of entering and exiting your trades.
Penny Stock Alerts 5 -Take Profits Quickly
The key to trading penny stocks for maximum profit is to maintain a disciplined approach to entering and exiting your positions. Selecting the best trade candidates should be of little concern if using a quality penny stock alerts service like this one. However knowing when to exit is a whole other can of worms. In general we like to start taking profits as soon as we hit a predetermined profit level (e.g. +20%) and start to exit our position at a predetermined loss level (e.g. -15%). While this seems simple in theory, the emotions behind actually implementing such a strategy takes a ton of discipline, but only until you master the emotions of trading penny stocks will you become a masterful trader. Good luck!
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