Penny stock trading is not for everyone!!

Welcome to the "Penny League"!!

Only those with a tolerance for "high risk" should consider trading in penny stocks! Penny stocks are volatile by nature. These stocks can swing in either direction rather quickly. On the upside, one can quickly make a lot of money in penny stocks! Penny stock companies range from either being new to the public trading scene, to those who are "fallen giants". It must be remembered that it is the nature of a company to make money and to expand. In penny stock trading, one is hoping to latch on to one of these expanding/emerging companies at "rock bottom" prices. The more you "play" the penny stock game, the more you will realize that the stock market in general is very much affected by news, either good or bad. You will need to constantly monitor the news. Timing is a critical element when investing in penny stocks. You don't want to find yourself in a situation where you invested $2,000 one day, and 2 days later the stock fell 50% -- which does happen! As a general rule, look to buying these stocks at their 52-week low, or lower.

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Tip offs for stocks you may want to monitor can often be an increase of volume of trading. Beware...before getting involved with any stock you should ascertain if the high volume is either a "dumping" (selling) or a buying spree. New products such as that which Manhattan Scientifics (MHTX) is working on (an extremely long life small battery) or the cure for cancer that many biogenic companies, like Techniclone Corp (symbol: TCLN) are pursuing may be your golden banana - should they succeed. However, if you look closely at these there are indications of possible problems...MHTX has had an insider trade stocks, and TCLN has

shown indications of financial problems (selling building and leasing back)..

This is the sort of information you have to weigh carefully before deciding

whether to invest either any at all, or just a small amount of your limited investment dollars in a particular stock. Perhaps you may decide to limit your investment to say only $450 or $600, vice a typical $900 - $1200 with these two....

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Company Fundamentals are Important

(or are they--see Tokyo Joe below):

Other things you want to constantly monitor are signs of poor company management, or a coming reverse split in the stock. A reverse split, more times than not will not help your position (see info on reverse splits at: http://www.stockdetective.com/reverse.asp. It is our position that a reverse stock split amounts to government (S.E.C.) approved grand larceny....There are legitimate reasons for a reverse stock split; such as when a company is selling its stock at $0.80 cents or so, and wants to meet the minimum $1.00 bid price to be listed on the NASDAQ (to get more exposure). On the other hand, we feel that companies that don't meet the NASDAQ minimum capital requirements, and still do say a 1:10 up to 1:100 reverse stock split... have to be suspected as being "pump & dump" companies (in it to rip capital off from investors)...We have included links where you can find fundamental information on a company (make sure sales are good, inventory is low, and overall assets are at least 1 - 3 times liability). There is also a link where you can find what insiders are doing at the company. Insiders (company employees) often buy when things look good and sell before things go bad. A note here: don't be fooled/lulled into "feeling good" about a company simply because there are 1 or more recent small (amount) purchases of company shares by insiders...If they felt good about the company...think; "why then not buy a large amount of shares"??....Also see reverse stock split study (The Reverse Split - A "Kiss of Death"?) at: "The Napeague Letter".

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CHARTS TELL MUCH OF THE STORY: Don't overlook the power of charts! A knowledgeable chart reader can tell where a stock is tracking towards - but, it is essential that all other reliable information on the stock be considered also - and not just its chart...Don't rely on only one source of information! A good quick primer on charts is at the Microcap Alliance

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Keep track of upcoming Reverse Stock Splits at:

CBS Market Watch, and at Yahoo

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Long Term Investing is Important:

Because penny stocks have been known to lose half their value - in some cases within a matter of minutes - you should consider only making long-term investments in penny stocks. Play with only a little money at first ($1,000 - $2,000). If you win, compound your way to success! Look for a cheap on-line brokerage, because you will soon find that you have to pay more for penny stocks than for a blue chip stock in broker fees; so it becomes most cost effective when buying penny stocks to buy at least $1,000 worth at any one time. Some "players" sell their stock, or sell half of a particular stock when it goes down 8-10% in value. This may be something you may want to consider.

Another frequent strategy is not to put all your money in 1 stock only. We had one stock we bought at $.05 cents, and it quickly dove to under $.03 cents (taking half our investment money). It stayed around $.015-$.025 cents for about 8 months...But we hung in there!..Suddenly it made a run to over $.20 cents and we cashed in big time..So be prepared to hold some penny stocks long term; and just as important - to sell some others within hours or days of buying them - whatever maximizes your profit...

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WHAT TO LOOK FOR:

The fast money in penny stocks is made on stocks that are "making a run up". Because one can buy so many shares of penny stocks, occasionally a stock quickly makes a run upwards. Tip offs for this is usually extremely high trading volume (15-100 mil shares traded or so). This gets tricky. You will need "nerves of steel" to ride a running penny stock. That is because a running penny stock can turn downwards very quickly. You will need to monitor it closely and decide when to exit/sell. About high volume (mentioned above already): once we "dove in" based on high volume alone without watching the stock for a while..The high volume turned out to be a "dumping/selling spree"...A few weeks later the stock (SYQT) went Bankrupt....be careful here!!

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BUYING PENNY STOCKS:

Get used to not buying stocks for the asking price, unless you are about to lose a "priceless" opportunity. At Gold Pennies there is a link to a java quote system (at Quote.com--in the War Room) where you can actually see the "spread" (ask and bid).., but delayed 20 min....Try offering between the spread if you have time to kill. Wait for the purchase price to come down to you. We nearly never suggest chasing an upwards moving stock. Have patience...wait for it to come down to where you are comfortable.....Here is the "Penny Stock War Room" which will help you to quickly locate information on pennies.

Another approach we use at Gold Pennies is to find "strong contenders" before they are in favor with investors....Sometimes these are trading under $.10 cents...But again..before you buy..look at its chart..if its trending down..buy wait till it hits bottom and make an offer for a "little below that"...A strong contender is a "real company"., not a "shell" of what once was...A good contender is say a company that had a sizeable increase in revenue this year over last...Nearly no signs of financial instability or law suits.. And they have to have a vision..or a good plan..We think internet stocks do not fit into

this definition..Many internet companies are really not making more than several thousands of dollars and some are losing money..

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PENNY STOCK LIST + SCREENING: You can quickly search for over 12,000 penny stocks in our Penny Stock War Room...There is also a link to a free large list of penny stocks in our free "War Room". And by choosing "Super Stock Screener" in the War Room, you can screen stocks by volume, price, yield, etc. Caution: Don't get over-inundated with information...Select the best stocks with the best potential...Keep your baseline "daily Watch List" down to 10-25 stocks..but don't close your eyes to new investment opportunities. Use the War Room for FREE by just book marking it in your browser...that way you will always have the updated version..

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WHERE TO BUY STOCKS:

At Gold Pennies, we purchase penny stocks on-line

via E*Trade. Many on-line brokers like DLJdirect

require you to call their 1-800 number, and wait on

hold for 20 min before placing your trade. At E*Trade

you can place a penny trade on-line almost

instantly. Also, the same penny stocks bought on

E*Trade for $19.95 would cost you over $38.00 at

DLJdirect and at many others.....

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OVER THE COUNTER BULLETIN BOARD (OTCBB):

Read CBS Market Watch latest information about what it is, and what it isn't.

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CARDINAL RULES FOR INVESTING: DO NOT move on any of these so-called "hot tips" you may read on these message boards, on USENET, or that are sent to you via stock newsletters (EVEN OURS) - until you first check things out for yourself. Message board and USENET visitors have been known to plant false information - to try to help out their own positions (declining stocks). Along with this rule goes the second and equally important rule: if a stock broker cold calls you out of the blue with a "hot tip"....hang up the phone!!!

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Three APPROACHES (try all or mix):

(1) Fundamentals

(2) Tokyo Joe's "Day Trader" Approach"

(3) Gold Pennies' System (mix of both)..

TO GET YOU STARTED: You might consider starting off by purchasing higher priced $1.50 - $2.00 penny stocks. There is a little less risk with these. They have often already proven themselves to some degree...But, these are also risky...so like always...Gold Penny

says; "don't bet the babies milk money on any stock", to include these....DON'T risk what you cannot afford to lose!

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RECOMMENDED READING:

Stock Scams, Schemes and Scums..

Watch out for these 10 major warning signs...a very informative, head's

up article

read this at: Stock Detective

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Stock Detective's Red Light District:

highlights the "pump n dumper stocks" and other risky stocks..

see them at Stock Detective

 

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