Can people really make penny stock fortunes leveraging penny stock trading… and even become millionaires? Well, it’s possible, but I sure hope you feel a little skeptical.

Yes, a few individuals earn immense sums in penny stock fortunes — average individuals who trade in their own time almost as if it were just a hobby rather than a real job. It does happen.

It is quite probable, nevertheless, that although they began with penny stocks they sooner or later rose to other possibly more fruitful stocks employing greater amounts of money after they felt they developed more experience and secured more capital with which to invest.

Navigate this guide to Penny Stock Fortunes:

• Penny Stock Fortunes – Understanding Risk vs. Reward
• Fortunes Require Penny Stock Research
• The Four Keys to Penny Stock Fortunes
• Always Do the Penny Stock Math

Penny Stock Fortunes – Understanding Risk vs. Reward

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Naturally the inquiry then becomes, how do you begin earning a profit with penny stocks while incurring the least amount of risk?

Before we resolve that query, let us specify precisely what we intend with the term penny stocks. There are varied definitions, some less exact than others, but generally the phrase denotes low-cost, speculative stocks that typically trade at lower than $5 per share. They are quite volatile and may drop or rise several hundred percentage points in just minutes. While this can make them risky, of course, it can also make them highly profitable… if you really know what you’re doing.

Penny Stock Fortunes

So now you’re probably wondering how can you efficiently calculate what penny stocks to buy and when to trade (entry and exit points) in order to best maximize your profits. Please remember, only after you’ve practiced with paper trading and then successfully executed several trades involving tiny, low risk amounts should you even dream about executing the sorts of trades you’ll need to earn the big bucks.

Fortunes Require Penny Stock Research

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Usually traders must put in the hours to become savvy pros. Only after trading stocks numerous times as well as dissecting the trends and outcomes over a long time period may a trader feel he or she truly comprehends trading penny stocks… and yet even then he may nonetheless turn a loss on several consecutive trades. Despite the many well-known penny stock patterns used to anticipate the market, none of them are 100 percent accurate. You will need to combined strong fundamentals, strong company research and your own insight to successfully trade for profit and not lose your shirt.

Yet there are, of course, many alleged shortcuts. There are numerous schemes available, methods to facilitate your ability to illuminate trends as well as profitable opportunities while they occur… however, be forewarned as most of these so-called systems are saddled with controversial problems. One primary problem is merely that any system still relies on analyzing the historical tendencies, and this still requires much time and effort. Any tool, service or individual implying otherwise may be scamming you.

A new development in stock trading — and particularly in buying penny stocks — is the use of sophisticated day trading software applications which perform scans of stocks to identify those which are forming bullish trading patterns, indicating that the values will soon rise. This kind of software system registers historical data constantly and learns more over time. Quality applications only provide recommendations when the software is statistically convinced in the result, based on the immense volume of data it has analyzed.

The Four Keys to Penny Stock Fortunes

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Think of these four steps as a kind of pyramid of discipline. Each trade should build on the previous steps. So only when a trade fits with what you researched and planned in every step described here should you execute your trade.

• A deliberate and poised over-arching plan. You cannot trade on emotion or on impulse. Every trade you execute must be part of a carefully researched strategy. People who trade on emotion have a bad habit of losing everything.
• Due diligence in thoroughly researching a company’s history, financials and executives. Are the executives investing their own money in this company? Does the company present its data clearly or is it trying obfuscate its data for some unknown reason? Always do your own research. Do NOT rely on hype from anyone else.
• Examine the support and resistance of the penny stock pattern. Compare the pattern to historical behavior of the stock and how similar stocks behaved after exhibiting this behavior. No matter what you discover when you research the company and what your overall plan is, you must also make sure the stock presents a pattern conducive to positive trading.
• Last but not least, always use limit orders and not market orders. A market order means you buy at the current market price, which can really destroy you with penny stocks or small cap companies. This is because the value of the stock will likely change before the order is completed. Thus you should always trade with limit orders when seeking your penny stock fortunes.

Be disciplined in adhering to these rules and you will greatly improve your ability to make your fortune with penny stocks.

Always Do the Penny Stock Math

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When I say, “Do the Math,” I mean this as a shorthand way of saying, “Do the Work.” Simply put, the people who make their penny stock fortunes do the work. No matter what penny stock newsletter a person uses, no matter what penny stock brokers successful traders choose, and not matter what day trading software he or she uses, the one thing that distinguishes the successes from the failures is that successful traders rolled up their sleeves and got to work — real, grin-and-bear-it, gotta-persevere-it WORK.

Each time you find yourself looking for a shortcut, ask yourself how bad you really want it. If you’re constantly looking for shortcuts, you’re probably not meant to enjoy real penny stock fortunes.

However, in the volatile market of penny stock trading, not every decision anyone or any application makes will be accurate, so even the best and most expensive software will not properly predict every penny stock possibility.

As always you must exercise your due diligence and keep your investments diverse. Penny stock fortunes are certainly a possibility, but I urge you not to succumb to the lure of the naïve get-rich-quick mindset. Ironically, avoiding this mindset is the key to success and ultimately your key to penny stock fortunes.

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If you are considering penny stock investing, then you need to take a good hard look in the mirror and ask yourself if you have the poise, discipline and vigilance to make this OTC market work for you. The best penny stocks require extensive research to divulge, and they often act like poor-performing investments for long periods of time before they pay real dividends.

Penny stock fortunes are possible if you know how to read stock charts and leverage the latest and greatest day trading software. But if you are new to this business, you must be wary of the many sharks trying to take advantage of you, and you must be very selective and critical when you evaluate online stock brokers.

It may be tempting to strike out on your own and invest in penny stocks online without any oversight from an experience professional, but strongly discourage you from taking such steps until you have really taken the time to learn how this volatile market works. You will need to be vigilant about the various sharks trying to take advantage of you, and you will need to make sure you always do your due diligence before investing in a particular company. There are a ton of opportunities in this difficult economy, but you must be disciplined and thorough when you begin your penny stock trading journey.

Spend at least six to ten months researching and studying this market, and then after that spend at least another six months or so paper trading — that is, trading the micro cap stocks for practice without actual executing your trades and charting the successes and failures of these practice runs. After all that, make sure you select a trustworthy and helpful stock broker. Then and only then will you be ready to take full advantage of this volatile but promising endeavor. Buying penny stocks can be very rewarding, but only to those who take the time to do it right.

A stock chart is simply a pictorial view of the price of a stock over time. Virtually all common styles of stock charts can be generated for free online or through your online stock brokers. Just generating charts is not enough. You need to learn how to read stock charts in order to gain any value from them. Learning how to read stock charts can be broken down into understanding the timescales, understanding the price scales, and knowing the different charting styles.

The Time Scales

The time scale you choose determines how often the price movement of the stock is summarized. If you were to look at the stock price every second the chart would look like it was buzzing. In order to see price data that is relevant to the investment you are looking to make you should set the time frame to be similar to the amount of time you intend to hold the stock. If you intend on holding the stock for decades set the time frame to yearly. If you intend to hold the stock for a week then follow the weekly or daily data. Always look at the longer time frames after you find a stock that interests you because you may find a longer term trend that is clearly in opposition to your trade plans. It doesn’t mean you trade isn’t correct if a longer term trend is countering it, it just lowers the odds a little bit that your trade will go as planned.

If you are buying penny stocks, you need to determine if you’re looking to capitalize on day trading or if you’re just looking for a diamond in the rough to stick with for the long run.

The Price Scales

The hardest part for me to grasp when I was learning how to read stock charts is why anyone would choose to set their price scale to logarithmic versus arithmetic. The arithmetic scale is the traditional way you would assume the prices would be set on your chart. Essentially all the prices are evenly spaced. So when the price moves from $5 per share to $10 per share it looks the same in distance when the price moves from $20 per share to $25 per share. This is how we are used to thinking about money. You’ll need to learn to think a little differently if you seek penny stock fortunes.

When it comes to earning money from stock investments you need think about gains and losses in percent changes. If you buy a stock for $10 per share and it gets to $15 per share you earned $5 per share. You would also earn $5 per share if your $20 stock went to $25 per share. The arithmetic price scale would show this price gain evenly. However, both stock investments did not return equally. The stock you bought for $10 per share gave you a return of 50%. The stocks you bought from $20 per share only returned 25% of the money invested. The first investment performed much better. In order to magnify the difference of these two investments you need to plot the price movements on a logarithmic scale. The logarithmic scale (sometimes call semi-logarithmic scale on charting systems because they live the date (time scale) arithmetic) prices percent changes on equal distances. So now the $10 investment move would look twice as large as the $20 investment move.
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The second advantage to the log scale price plotting is that you can quickly determine the average return per year of a stock. Stocks are known to be a compounding investment. When someone says the price returns 10% per year that means a $100 stock would return $10 the first year, then the next year it would return $11, and then next year it would return $12.10. Comparing two stocks can be difficult because the price movement years ago looks really small compared to the big growth in the present time. When you convert to a log scale the price movements will often look more like straight lines climbing up. Whichever stock has a “steeper” straight line has been doing better.

Charting Styles

The four major types of charting styles you’ll use when research penny stocks online are the point chart, the bar chart, the candlestick chart, and the point and figure chart (pf chart).

The Point Chart

The point chart is simply the closing price at the end of every time period in the timescale you selected marked on the chart with a dot. Sometimes the dots are left off the chart and just the line connecting the dots is shown. Useful for quick checks on stocks to just see “how they are doing” or when you don’t use much technical analysis in your buying decisions.

The Bar Chart

The bar chart is the point chart with some added information. The open and close of the stock market time frame is shown with a horizontal line into the line. The line tops out at the high of the period and the price line bottoms out at the low of the period.

The Candlestick Chart

When teaching people how to read stock charts in penny stock trading I really enjoy the candlestick chart. The candlesticks are formed just like a bar chart except the open and close prices form a box. The box is left white if the price increased over the time frame and the box is filled black or red if the price decreases. The band of white and black boxes is called the body. The tails of period high and lows is called the shadow. The candlesticks give a great visual of the time frame with a clear reference of where support and resistance levels are formed by the body and where the shadows tried to penetrate, but failed.

The Point Figure (PF) Chart

The point figure chart attempts to summarize chart data by only showing significant price moves. The pf chart was started before the invention / popularity of computers when brokers or traders would maintain data on graph paper. In order to minimize the size of the charts and reduce tracking only price changes that exceeded a quantity deemed significant by the trader would be recorded. Also, the charts don’t move horizontally with every new period, but only when the price direction reverses. So if the price is moving up there is a vertical series of “X”s and if there is a fall in prices there is a vertical series of “Os.’ The chart only moves right when the direction of the stock prices changes. With this charting support and resistance levels are very easy to see because they are not spread out over “flat” price times.

You should now have a good overview on how to read stock charts. Your next step should be reading about the different patterns in the charts and finding support and resistance levels so you can glean more information from the stock charts.
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It seems both counter intuitive and just plain odd to discuss one of the nations oldest and largest corporations on a site about buying penny stocks, but I guess it is just that kind of economic era.

The Detroit Free Press has this to say about the value of GM’s stock:

Another concern for GM is that investors will begin to consider GM shares a penny stock if the price stays below $5 per share for too long. Although several experts doubt that would occur with such a well-known company, GM shares have been below $5 consistently since November.

While this is the simplistic designation for a penny stock, it is still something to consider. This is a penny stock that could be traded with tremendous potential in the coming months.

Shares fell to $1.09 Tuesday morning but rebounded slightly, ending the day down 20%, at $1.15.

The drop to $1.09 was the lowest GM shares have been since April 28, 1933, according to the Center for Research in Security Prices at the University of Chicago.

Experts have said that GM’s stock is overpriced, considering that the automaker’s debt-restructuring plan will leave current shareholders with just a 1% stake in the reconstituted company.

“We see an increased likelihood that the shares will decline as the company’s viability-plan deadline approaches,” Efraim Levy, an analyst with Standard & Poor’s Equity Research, said in a note.

GM’s debt-restructuring plan calls for GM to issue about 60 billion new shares in exchange for debt. Then, GM will immediately do a 100-for-1 reverse stock split, in which shareholders would get one new share of GM for every 100 they currently own.

Now this isn’t a suggestion you run out and buy GM right now or anything. But you might keep a shrew eye on it. This is the rare economic era where trading penny stocks online can become a big game for even the most serious of investors.

Here’s a secret for everyone attempting to find the best penny stocks on the Internet: Such a list does not exist!

If you find anyone claiming to provide a list of the best penny stocks for free, they’re full of it. Stop hitting the search engines or message boards trying to find the ultimate list of penny stocks. Real penny stock lists are incredibly valuable and you will not find them for free online.

Best Penny Stocks – The Reality

It takes an immense amount of effort to unearth the hottest stocks before they spark and rise. It also requires resources and time that most people do not have the luxury to spare. Furthermore, it takes the kind of industry knowledge & wisdom which can only be developed & honed with years of experience doing real work in the field.

The potential isn’t hype. There truly is a ton of money to be made in these volatile investments, but you will only attain success by knowing what to buy and when.

I would argue that the most important thing you can do to pick the best penny stocks is to work on getting leads from professionals, then look into and research those companies yourself.

This could be exhausting. In fact, it may very well be impossible to do alone. This is why on the front page of Buying Penny Stocks I describe why a subscription to a professional penny stock newsletter is an absolute must.

If you try to go it alone with penny stocks because you think the best penny stock newsletters are a scam or something, prepare yourself for disappointment… and possibly serious financial consequences.

Find Good Penny Stocks With Due Diligence

So I will once again reiterate the main steps to success with penny stocks:

1. Truly study before you dive into it, and don’t just read websites and forums. Buy a good book.
2. Research and select a good professional penny stock newsletter. If you’ve got the funds, it might behoove you to join two, then just stay with the one that you like better. I can’t stress it enough: you must join some kind of newsletter to have any success finding the best penny stocks.
3. Do not just blindly go with the picks offered by any newsletter. No newsletter and no single entity or human being will always pick winners. Penny stock newsletters provide a required foundation and a necessary advanced step on the public, but you must always do your own due diligence.

Penny Stock Software

As I’ve stated before, for those of you who are a little more technically savvy, some day trading software can help immensely as well. Please be forewarned, however, that most day trading software — even really effective, top-of-the-line day trading software — does not feature the same sort of polish and fancy interfaces you’ve come to expect with Windows or Mac applications. They tend to be rudimentary and utilitarian.

I’ll discuss this more on my page dedicated to day trading software, but to obtain the best penny stocks from most of these applications requires a bit of technical savvy and patience. It just isn’t the same as operating a web browser.

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So I hope this rude awakening on the reality of seeking the best penny stocks helps you to proceed with greater caution and wisdom. Thanks again for visiting Buying Penny Stocks and I hope you’re visit was worth your while.

Most consider penny stock trading to be the exchange of stocks at a price between $1 and $5 per share. You’ll also see penny stocks labeled as micro cap stocks, microcap stocks, nano stocks or even just small cap stocks.

Penny stock trading occurs within the OTCBB (Over-the-Counter Bulletin Board) or on the Pink Sheets. So you’ll also find these stocks labeled as OTC stocks (OTC stands for over-the-counter) and you’ll sometimes see the OTCBB and Pinks Sheets referred to as the penny stock market. Penny stocks tend to represent smaller companies, newer companies or struggling companies. They either haven’t proven themselves enough to list on NASDAQ or the grand New York Stock Exchange (NYSE) or in some cases they’ve been penalized by those exchanges and removed.

Penny Stocks Aren’t Cheap

There is a common misnomer regarding penny stock trading. Because of the term “penny”, people seem to think these stocks are somehow less risky than “regular” stocks. This, I’m afraid to inform you, is not the case at all. In fact, penny stock trading is probably more risky then standard trading because they’re so volatile and have little information available. Let me explain the disadvantages to trading penny stocks so you understand what you’re getting into with these profitable but volatile little devils.

Penny stocks lack liquidity. Most penny stocks trade strictly for the profit of the trade rather than for the sake of investment. This means penny stock investors rarely have an interest in the long-term future of the stock. This minimizes share prices and thus minimizes available liquidity.

Penny Stock Risks

Additionally, trading penny stocks involves trading companies with minimum financial data available. Major exchanges such as NASDAQ and NYSE feature strict guidelines to financial reporting, but Pink Sheets and the OTCBB do not. So you’ll often be heading into the dark with penny stocks. This doesn’t mean you can’t find this information on your own, but it will be more difficult and less regulated.

In a related topic, you’ll often find it difficult to ascertain a penny stock company’s background. It is vital that you do your due diligence when it comes to companies traded as penny stocks. Micro cap stock companies often have little to no history or they may even have a questionable history which they don’t necessarily want you to know. Don’t be impatient; you must know the company background when you engage in penny stock trading.

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Penny stock traders often just “play” with penny stocks, trading regardless of a company’s potential. However, to secure your investment you really should investigate the nature of the company and its direction before risking your money in penny stock trading.

Practice investing Stock With Paper Trading

I suggest investors, veterans and newbies alike, familiarize themselves with penny stock behavior through paper trading online before diving into penny stocks with real financial risk. Then when you start, rely on a reputable and established penny stock broker rather than some hyped service with little record. Be wary of services offering penny stock tips and trades all-in-one.

I do not mean to dissuade you from making yourself some money through penny stock trading; you certainly can make penny stocks profitable. But I find many people researching penny stocks seem to be looking for a means to get rich quick, and without the proper tools and resources, they’ll actually find themselves on the fast track to getting poor quick.

Take it seriously and be responsible and yes, you can make some real good money buying penny stocks.

More than anything, try to develop an understanding of the similarities which exist among multiple successful small companies. Look for the health and potential of the actual company and don’t fall for crooks temporarily inflating penny stock values with pump and dump schemes. In short, do your penny stock research.

You can enjoy great success with online penny stock trading if you’re responsible and exercise due diligence.
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Day trading software can serve several different purposes. This page will describe the three main areas of day trading software then over time I may make specific suggestions in each area. The three main areas are the following: stock trading software simply used to execute trades, software used to chart the history of stocks, and software used to anticipate the future behavior of stocks.

I do suggest doing your research before investing in any particular package. You’ll find a ton of competition among day trading software developers. And while I can’t recommend one just yet, quality free day trading software is becoming more practical with the growth of the open source software development community.

Buying penny stocks can be a competitive and volatile practice requiring great research and precision. The idea behind day trading software is to take as much of the busy work out of penny stock trading as possible so you can concentrate on the insights that lead to hot penny stock picks.

Whether you use it for basic operations or to get a step on the competition, it is important that you not underestimate the importance of these tools. With the evolution of the day trading penny stock profession, you can rest assured your competition will be leveraging this software, so if you’re not, you’re simply putting yourself at a disadvantage among the day trading systems.

Stock Trading Software

Stock trading software is the basic software you will need to search for trades, obtain core information, execute your trades as well as manage your accounts. You’ll find some applications provide a complete package to handle all of your trading tasks. But many others come as separate components, each component specialized to fulfill a specific investment purpose.

In general, the component stock day trading software tends to be more powerful and advanced, although it is often less polished for the everyday computer user. Complete application packages tend to be less flexible, but they do provide a degree of convenience and efficiency that can save you time.

Stock Charting Applications

Day traders use charting software to carefully observe their markets. Charting software is the day trading software day traders usually utilize the most. Charting software displays current and past market information in a graphical view designed to enable quick decisions. When you see people refer to day trader software they usually mean charting software. You’ll also see this software used for swing trading.

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When you select penny stock charting software, you will evaluate just as you might evaluate any software package. You consider ease of use, flexibility, and features. You will find that some charting software provides only the basics, such as charts and a few core indicators, while others provide more sophisticated features such as replaying charts. Even more advanced stock charting software will provide a programming interface for designing and implementing custom indicators.

Stock Predicting Software

The third type of day trading software involves a new breed of applications build to predict the hot penny stock picks. This is an area that can be a little sketchy. While there are applications that weigh a wide variety of variables to anticipate penny stock behavior, you should never strictly rely on any single application’s hot stock picks to make your decisions and invest your money. They should only be part of your overall comprehensive stock trading systems.

They do, however, take the leg work out of working through some of the data and numbers you must responsibly crunch before making every pick. Just don’t be fooled into thinking that buying a single penny stock picking application will make you rich overnight. They can and will help you succeed, but nothing replaces thorough investment due diligence.

Despite my warnings, I do believe they’re necessary if you want to compete in today’s market. Like it or not, you need to two things to compete: You need some kind of day trade software which provides potential picks and you need a membership with a reputable penny stock newsletter providing weekly penny stock recommendations.

Some will say that these are just made available to make money from you, but the fact of the matter is that all your top competitors will be penny stock trading with a penny stock newsletter and penny stock predicting application at their disposal. If you try to do it the old fashioned way, you’re willfully giving your competitors a head start every time.

Some of you may have reaches this page looking for my recommendations. While I have software that I prefer, I’m not ready to recommend or promote any single package as the best day trading software. There are just too many different options out there. It would be irresponsible of me to pretend I’ve fairly evaluate enough of them to tell you the day trading software I use is the best or that any one way will guarantee you your penny stock fortunes.

I am working on a responsible way of providing some recommendations, but I want to do this carefully. In the mean time, I hope this article on day trading software provides you with a solid foundation the subject and keeps you from plowing forward in too bold a fashion.

Thank you for visiting Buying Penny Stocks and I hope you return soon as I plan on extensively growing and refining my site over the coming months.
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