Finding Good Penny Stocks to Watch

Before we get to the point of finding good penny stocks to watch, let us first be familiar with what penny stocks are. Penny stocks are, in the USA, small public companies’ common shares which trade at a low price, being not more than $1.00. However, penny stocks are also defined as any stocks which trade for pennies and which trade for less than $5.00. Meanwhile, others would define a penny stock as any stock which trade off of the main market exchanges. Nonetheless, there are several incredibly large companies, on the basis of market capitalization, which also trade their share at less than $5.00 for each share and there are a number of small companies which trade their shares at more than $5.00! In general, nevertheless, typically a penny stock is a small company’s shares which are very illiquid and speculative. These companies are also commonly depending on requirements of limited listing, together with fewer regulatory and filing standards.

No Theory

 Having been through with the common knowledge of what a penny stock is, now we come back to the main discussion of finding good penny stocks to watch. Traders are almost always similar in what is going on in their mind; that is, wondering the signs to look for and how to identify the probability whether a penny stock is good and whether it is going to move up. While there is always a theory just about anything in this world, when you are trading, your success does not come from the theory; it comes from practicing and experience. Having enough experience, a trader will basically be aware of the good signs. Learning from the experienced trader is a great way to learn since the learning process is performed along with practice altogether. In such a way, a new trader will get his own theory that no other theories can match. At this stage, any penny stock trader will have to be prepared with any possibility.

The Basic 

In deciding which penny stocks to watch, every buyer who has a set of price for a set of amount has the role of a support. It is important to understand the essence of prices of support since there is no such thing as a perfect stock that is set up. Any traders will have to know that they are dealing with opportunities. With the use of ‘stop losses’, we can expect the mechanism to flow as follows; enter a stock when you see the perfect signs and you set it up. Next, watch whether the stock that you enter moves up or moves down. At this point, it is necessary for you to cap your gains and at the same time you should also cap your losses. Were these actions done well, your chance to be correct would not be 50%; instead it would be higher reaching 60% or even 65%.

The Example 

Take this illustration as an example in an attempt of finding the good penny stocks to watch. You have entered the stock at $1.00 and the cap gains that you have set are 10% with the stop loss that you have tightly set to 5%. This is the stop loss percentage that is recommended by many experienced investors in which the stop loss volume should be much higher than the support point. In the event that the stock begins going up immediately, you can sell it at $1.10 which you can consider as your gains. This is the stage when you could have a 65% chance of achieving a 10% gain. However, in the event that it falls to $0.95, you should sell your stock. If the stock that you entered goes down even further, the act of protecting your chances from further losses must definitely be done.

Preferred Sector 

The thing that you should especially pay attention to is if the stock is under a particular sector that is at present preferable in the market or not. It is inescapably important for you to know this with the reason that if the sector in which you invest is preferable in the market, the stocks that are below this sector will generally be doing well. Therefore, if you are in a situation where you have to make the right decision between a couple of good penny stocks, your decision should be taken on the basis of whether one of them is under a preferable sector – or which one of them is under a more preferable sector, simply speaking. Another thing in deciding the penny stocks to watch apart from being under a promising sector, your stock should also have an optimistic outlook both in the long term and in the short term. By investing under a bullish sector – that is an optimistic and promising sector – you have the good opportunity to have massive gains due to the overall environment surrounding this sector. With penny stock intrinsically risky, choosing the one with a large potential amount is a wise decision.