Blog : How To Get Started in Penny Stocks
by Peter Leeds on April 12th, 2016
Want to know how to start in penny stocks? Here are the main concepts to get you up to speed within 48 seconds. Nothing has been added here, except the absolute necessities.
1. Avoid Low Quality Markets
Stick to penny stocks trading on the better stock exchanges, and yes, there are some penny stocks which are listed on the NYSE, NASDAQ, and American Stock Exchange.
In terms of the best exchanges, the majority of penny stocks trade on the Bulletin Board. Known as the OTCBB, this is the home to the majority of the highest-quality, low-priced shares. Since the Bulletin Board is owned by the NASDAQ, this exchange comes with everything that a self-respecting investor would want in an investment:
- reporting requirements
- shareholder visibility
- passed the vetting process
- abides by specific regulations
Now, there are a few low-quality exchanges. Since these are incredibly easy to get listed upon, they are saturated with thousands (over 6 thousand, actually) of very poor quality companies. The dangerous exchanges which all penny stock investors should avoid at all costs are the Pink Sheets (OTCPink), the OTCQX, and the OTCQB.
2. Avoid Free Penny Stock Picks
All free penny stock picks come with hidden motivations, which will destroy your investment dollars. It doesn't matter the source, they are all designed to get you to take a certain action (buy shares), in order to achieve a specific result (drive the stock price higher temporarily).
You will be lied to and mislead through tactics including, but not limited to:
- message board posts
- free online newsletters
- chat rooms
- unsolicited e-mails
- glossy pamphlets sent via conventional mail
- websites
Most of these scammers and dishonest players are using tiny penny stock shares as a means to trick you into investing so the stock gets a tiny bump higher. Then they sell, stop promoting the shares, and walk away as the penny stock collapses back to it's more appropriate level.
3. Start Paper Trading
We know, you are anxious to get started right away. However, it will serve you better if you begin by paper trading, at least until you learn the ropes and develop a winning strategy. [Here's an Infographic about how to Paper Trade]
4. Who to Trust
There are thousands of theorists who will tell you what you should do. The best way to focus on someone who is proven, or a service that can be relied upon, is to check a couple simple factors:
- Does the media trust them? We don't mean, "do they have a few media logos on their website?" Everyone does that, regardless of whether or not they've even been on television.
- How long have they been in business?
- How many others have subscribed to their service?
- Do they have a 100% Unbiased Guarantee? This is the best way to ensure that they have your best interests at heart.
- Do they have any published books? We don't mean self published, everyone has a few of those nowadays, and it erases the extensive vetting process you should normally see from a proper publishing house. The number of self-published books, where they are making "bestseller" claims is a bit alarming too.
- Do they have a phone number? Most online services don't, and certainly 100% of the lower-quality outlets never provide a name or number through which they can be contacted.
Perhaps the overarching point here is, in penny stocks, "don't believe everything you see or read."
We will get into some more complicated concepts in an upcoming blog, but for now here is some viewing which will be beneficial as you start delving into actual penny stock trading:
Video: How to Know When to Buy/Sell Any Stock
Video Just Released: Platinum Prices
Video: 5 Penny Stock Protections
You are reading this old blog entry because we still like to reference it. :-)
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