When trading penny stocks you always have to do your research as good as possible. Trading penny stocks can be very risky because they can move very fast. Ofcourse this means also that it can be very profitable to trade these stocks.
Most important 3 tips when trading penny stocks
1. Never just buy because others do.
Many penny traders especially day traders jump in and out from penny stocks in seconds by just following others or by just gambling. Never do this when trading penny stocks. If you are serious about investing in penny stocks you need to do your research good. But what to research for to find the fastest growing companies in the Stock Market today?
2. Research the most important aspects of the business.
- Share structure, does the company have a tight share structure and did it had it also in the past? This says something about the management and how much they care about shareholder value. If the outstanding shares did not go up much over time (or even better went down!) then thats a great sign!
- Revenues, what are the abilities of companies to generate revenue? Don’t think that high revenues is good, we are looking to make profit so what we are looking for are companies who secured the ability to grow revenues. With other words, if a company has proven that it can make revenue when it has growth funds then the moment it gets those funds is the sweet spot to invest in our opinion. If the company has already proven in the past to be able to generate the revenues then its even better.
- Management, does a company have regular Conference Calls? Are they approachable for investors? Do they keep the share structure tight? Do they have any relating experience in there field? All those questions are preferred to be answered with YES!
3. Check out research reports if any, sometimes they are not so valuable but its always worth looking at them to see if you find something that seems strange, if so look further. Don’t forget to look in the fillings but with the starting growing companies above points are most important in our opinion.
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