How Not To Get Burned With Hot Penny Stocks

Posted on | January 6, 2009 | No Comments

If you could identify hot penny stocks while they are just beginning to warm up, you would have the penny stock trading game licked. Hot penny stocks are those which are poised to appreciate significantly in value in a very short time, and the best way to spot them is to study all the things which influence the way the market values a stock from day to day.

The trick to succeeding with penny stocks is to get out when everyone else wants in, and get in when everyone else has beaten a path to the exits. If you can time your entry into penny stocks so that they become hot penny stocks in a shot time, you will be making a good investment. But how can you do that?

Strategies For Finding Hot Penny Stocks
The first thing you must do, as with any investment, is to establish a budget and stick to it. If the hot penny stocks you come across are selling for dollars instead of pennies, step back and decide if they are an appropriate risk for you. If they have already had a significant run-up in a short period, you could be getting in at the tail end of a burying spree and end up holding the bag when other buyers dry up.

If there’s no one to sell to, your hot penny stocks will lose their value as quickly as they gained it. So don’t throw all you penny stock funds at a single stock, no matter how good it looks.

Look at the past trading patterns of hot penny stocks to determine how often they have had sudden upswings in price. All the information you need will be in their past performance charts, so learn to read the charts, and then look at any news which may have accounted for the ups and downs. Make sure all significant price changes had appropriate underlying volume.

Look At The Big Picture
Look at the management and products or services of the company, and at the industry in which it operates. Check out the competition, and learn if the industry is being influence positively or negatively by outside factors like economic conditions or new legislation. If a particular industry is hot, the chances are good that it will produce several hot penny stocks.

Making a good profit, or even a fortune, in hot penny stocks is not impossible; the penny stock market is high risk and high reward. Just make sure you never invest more than you can afford to lose, and that you lock in your profits with sell stops.

By: Wade Robins

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