How To Choose Penny Stocks

Penny stock investing is about buying low priced stocks (less than $5.00 per share) and selling them to make profits. Penny stocks/shares are also referred to as micro-cap stocks.and are traded Over the Counter (OTC) in the USA. There are many factors to consider when you start trading penny stocks in the market, this type of stocks is generally renowned for their “high risk, high reward” profile.

How to choose a good penny stock to invest in? One of the ways is to choose penny stocks that are on an upward trend. The best penny stocks to buy are companies that are experiencing an upward trend and consistently move higher.

Another thing to consider when choosing penny stocks is the earnings per share (EPS), which serves as an indicator of a company's profitability. Do not pick a stock that has negative EPS, which means the company is losing money.

You should also check the trading volumes before buying a penny stock. One of the investing strategies is to choose stocks with high levels of volume. This is to ensure the high liquidity of the stocks you are buying. If a stock is traded frequently and in high volume, then there would be easier to find a trader to buy. But, on the other hand, if a stock is traded in low volume, then there are not much traders involved in the stock and it would be more difficult to find a buyer.

* Next: How to Value a Penny Stock - Market Cap