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How to Find Hot Penny Stock Picks

Jul 16, 2008
Check industry trends

The most reliable way to find hot penny stock picks is to look for industry trend. Your goal here is to find a trend when it's just starting on its upward swing. That means finding companies that are producing products that are just starting to catch on in their target market. By the time everyone knows about the product, it's already too late to make the greatest profit.

Build a list

Once you've picked out a few companies that seem promising, put them on your watch list. Keep track of how these stocks move every day for at least a few weeks.

Do your research

Sure, you know you should research a company before you by stock in it, but when you can buy stocks for fifty cents each, it's tempting to skip chasing after hard-to-find data and just go with your gut. Just like with more expensive stocks, though, your instinct won't always lead you to a profitable trade. In fact, profitable penny stock investing requires more research that investing in more popular stocks. The reason is because these stocks don't follow the same filing and disclosure rules stocks on larger markets, so it can be hard to find critical information about them.

Look for solid businesses

Again, it seems like an obvious thing to look for, but the low cost of penny stocks has lead more than one investor to bet money on an "innovative" company that has no real potential. Take a look at both the market for the business they're trying to build and the way the company is run..

Use a screener

Stock Screener is an essential tool that allows traders to wade through thousands of stocks and return a dynamic list of stocks that match technical and fundamental criteria. There are several different types, such as those based on trading signals, trends analysis, or momentum indicators.

Many of the highest quality screeners are available free online, but not all of these include penny stocks. To find hot penny stocks picks, look for a specialized penny stock screener that can work with the limited amount of data that's available for these stocks.

Newsletter

No one person has the time it would take to find hot penny stock picks based on research and analysis alone. If you want to find the best picks, take advantage of one of the magazines or newsletters out there that deals with penny stocks. It's find it the resource you choose isn't dedicated exclusively to penny stocks, but it should provide enough information to help you out.

If you're a beginner in stock trading, penny stocks aren't what you should start out with. They're both volatile and hard to get information on, which is a hard combination to work with. If you're an experience trader, though, careful research and a cautious approach can help you find hot penny stock picks.
About the Author
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