In for a Penny, In for a Profit
If penny stocks were determined strictly by price, some of the largest companies in the world almost became “penny shares” during the first part of 2009. The Securities Exchange Commission is supposed to consider all stocks with a price per share of less than five dollars a penny stock. But in the realm of financial services there are many shades of gray, or in this instance pink. Pink Sheets, is an electronic quotation system operated by Pink OTC Markets, and displays quotes from broker-dealers for many over-the-counter securities. Companies do not need to fulfill any requirements (e.g., filing financial statements with the SEC) thus making them a risky investment. Because of their lax accounting and reporting guidelines, many feel “penny shares” are vulnerable to manipulation. I’m referring to the famous scam “pump and dump.” Where at times influential investors can pump up a stock, sell it for huge profits, then D-list the stock.
So in simplest of terms, penny stocks are usually determined by three basic factors. They are, the price per share, the market that the stock trades upon and the market capitalization of the company from which the stock derives. If you are considering trading penny stocks, you should know that even these factors are up for debate, depending on which broker you use. Some brokerage firms will treat all stock from companies under a certain market cap as penny stock.
Penny stocks are high risk, but can yield high rewards if you carefully research these investments. Make sure that you understand that it is easy to lose all of the money you have invested, but it is equally easy to make fast money with some smart planning and detailed technical charting. A substantial look into this market will show that a lot of these small companies are honest and have tremendous potential. So let’s say you found a way to insure you that penny stocks are the way to go. I think you can start to see the potential for large gains. I am going to provide you with a couple of penny sectors to get you started.
The first is an actual example that I made an astounding killing on. The “Nano Technology” sector is a great place to start. There are many Nano companies that already have financial backing and poised for tremendous growth. I’m not going to tell you which stock, because that would take all the fun out of researching for you. The other sector I would strongly suggest is “Clean Energy.” With all the attention clean energy is getting, the new commitment by our new administration, I’m sure there are small companies that are diamonds in the rough.
A small market cap usually relates to a small business, which unfortunately in this economic crisis period has a higher rate of total business failure. The fastest way to become a millionaire, short of discovering or inventing something, or hitting the lottery, is to make the right penny stock investment. Because they are usually from smaller and largely unproven companies, they can be purchased at bargain prices, literally for pennies. Again I must emphasize that you have to have an excellent technical platform, one that has candlestick charting, preferably, in order track the trends of these stocks.
I don’t profess to being an expert, but I do know of some. I obviously don’t have the time to go into all the details now, but at my site Market Mentalist you will find all you need to know about investing online. There is access to some of the top trading systems available including software, books, newsletters, and Forums. I have a special section devoted to Penny stocks. Whether you are an inquisitive novice or a seasoned pro Market Mentalist offers the online investment resource you just might be seeking.
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