| Small cap stocks have always been where the action | | | | growth company in the financial statements. Through |
| is. Historically, they have had more upside potential | | | | a basic knowledge of reading financial statements, |
| and on average the small cap indexes have | | | | you should be able to figure out whether the |
| outperformed their larger counterparts. Why is that? | | | | company has a good cash flow, good net income |
| The simplest explanation is that when you are small, | | | | and stable assets for 3-5 years prior. If you don't |
| you are usually more hungry and nimble as a | | | | know how to read financial statements, learn! Its a |
| company so your earnings continue on an upward | | | | skill that'll make all the difference in eliminating bad |
| spiral till you reach the next phase of growth or | | | | stocks. |
| plateau. Are you interested in finding these smaller | | | | Technical Analysis |
| companies before they start their meteoric rise or | | | | A lot of penny stocks trade in more-or-less |
| better yet before they fizzle out? Of course you do. | | | | predictable patterns. These patterns can be |
| Otherwise you wouldn't be reading this article. Here | | | | determined after you have studied the trends of the |
| are some pointers for making profitable penny stock | | | | stock over the past weeks and months. Once you |
| trades: | | | | narrow your stock research to less than 10 penny |
| Emotions and Profits Don't Mix | | | | stocks after going through the numbers as |
| There are few things to keep in mind before you | | | | suggested above you should start looking at the |
| immerse yourself in the volatile trading waters of | | | | charts to see what a good entry and exit point |
| penny stocks. Their prices are subject to change | | | | would be. There are tools out there that will do the |
| very very quickly. Its important to check your | | | | analysis or stock filtering for you but the final decision |
| emotions at the door (more easily said than done) | | | | still rests in your hands. |
| before you jump in. One way to reducing the role | | | | Online Resources |
| emotions play in your trading decision is to establish | | | | While you shouldn't believe everything you read on |
| an entry and exit price for your trade. Decide in | | | | the web, you should keep your eyes and ears open |
| advance, what you're willing to pay for a share of | | | | to whats happening out there. A lot of the people |
| stock and what you will sell for once it reaches that | | | | who buy/sell penny stocks get their information |
| price. If you do this in advance, you will have taken | | | | through paid newsletters and discuss their picks in |
| emotions out of the equation (to a certain degree). | | | | forums. These places can be great to see pros and |
| Investigate Before You Invest | | | | cons of certain company. Don't forget that a lot of |
| The fact that these are penny stocks makes this | | | | the information online as in print can be biased. Keep |
| rule even more applicable than for stocks that trade | | | | an open mind and check your biases at the door. |
| on major exchanges. The good news is that the best | | | | Follow any advice blindly and its a sure recipe for |
| penny stocks will exhibit the characteristics of a good | | | | going broke. |