Home » Finance » Investing

The Proper Way To Build A List Of Penny Stocks

Jul 19, 2008
Trading stocks on the Over the Counter Bulletin Board or Pink Sheet stock exchanges is probably the riskiest of all forms of trading. With the potential of astronomical gains, penny stocks have drawn many people into the world of speculation, often with disastrous results. Unfortunately, this happens more often than it should because one of the characteristics of penny stocks that draws people in, is their low share price. This fact alone is the number one factor why people that cannot afford to lose money in the stock market begin trading penny stocks; minimal cost per share.

However, trading penny stocks does not always equate to losing all funds in brokerage accounts. If a person, new to these stock exchanges, spends time acquiring knowledge and learning how micro-cap securities trade, they are on the way to potential profits. Implementing and testing a trading system designed specifically for trading penny stocks is the first piece of the puzzle. Once a sufficient amount of testing has been completed, finding potential securities to trade is the next step.

Building a list of penny stocks that have potential to increase in share price is difficult partly because companies trading on the Pink Sheet exchange are not transparent allowing investors to see financial statements and other aspects of the company. The Over the Counter Bulletin Board exchange requires companies to file Securities and Exchange Commission financial reports quarterly which allows for more transparency. This makes OTCBB stocks less risky than Pink Sheet Stocks. If at all possible, it is best to refrain from trading Pink Sheet stocks and focus on OTCBB securities until a complete understanding of penny stocks is attained.

It is best to first differentiate between varying sectors within the market itself and determine which sectors may be in favor when building a penny stock list. Once favorable sectors have been determined, it is time to begin screening potential stocks to add to the list. Investors and traders usually break down into two different groups, one being technical and the other being fundamental. Technical traders rely solely on charts, trading patterns, oscillators and various other indicators to determine which stocks to trade. Fundamental traders rely on the financial aspects of the company. Profit and loss statements, amount of debt, various ratios and ultimately the company bottom line. These two camps are uniquely different and seldom will you find a combination of both trading the larger exchanges with both being adherents to their methodology.

However, a combination of both camps is ideal for trading smaller stocks utilizing both methods when building a list of penny stocks. Fundamentally, acquiring as much information as possible about the company can give the trader an idea of the financial condition of the company and determine if they can implement their business plan. By reading chart patterns, support and resistance levels as well as other indictors can help the trader learn how the stock trades which helps determine the technical character of the stock.

Over time, the penny stock trader will learn which stocks have potential and which ones do not have potential. Eventually the trader will build a list of penny stocks that have the best possibility of gaining in value and will soon have a core of penny stocks that can be bought and sold many times over once the trader learns their fundamental and technical characteristics.
About the Author
Phillip Hatley has been trading penny stocks for over eight years. Learn more about speculating in penny stocks and building a list of penny stocks.
Rating:
Please Rate:
(Average: Not rated)
Views: 199
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources