Penny Stock Tips: How to Find the Right Stock

Penny stock fortunes have been made by zoning in on accurate penny stock tips, cancelling out those that are misleading, and of course, a fair deal of luck.

But the most important factor that can make or break a penny stock investor is the choices that he makes with regard to selecting the right stock to invest in. Here are some criteria that an investor can use in choosing his stock.

With low-priced stock, there is inevitably more space for growth. It might be good for a trader to pick stocks less than $2 to as low as 0.05%. When heeding such penny stock tips, it is also important that the investor makes sure that the reason for this low stock value is that this is still an up-and-coming company with potential for long-run expansion, and not an old company that is losing money.

Spot trends. Choose the stocks that are presently increasing. You can tell this if you compare the 18-day simple moving average with its 9-day result. If the former is higher, then it means the stock is moving up.

Find stocks that trade with a daily volume of 100,000 shares at minimum, because if there is liquidity, investors can easily go in and out unpredictably. Do not choose a stock with a negative earnings growth rate or negative earnings per share.

Do not be tempted by one-hit wonders. Your search for the right stock has to be over a prolonged period of time. If you base your choice on a single day, it just might be this particular stock’s one good day, with no more to come. Instead, choose the stock that goes up most often in a longer time frame.

Learn how to analyze chart patterns and find uptrends. Also, survey various news items and inquire about stocks of current interests. There may be people willing to give you penny stock tips on these trends, but be cautious and do not heed a particular tip without the necessary amount of background research.

Scammers abound. 5% interest and up as a percentage of the stock’s short interest might be ominous. However, it might also be a sign of a short squeeze up ahead. Learn to interpret the signs.

Finally, collect general penny stock tips-those that do not necessarily tell you exactly which stock to pick, but how to pick stocks. That way, you will be able to accumulate enough knowledge to trust your own instinct and judgment.