Winning Stocks

In trading yesterday, only the tech-laden NASDAQ avoided the selling, edging up 3.04 points to hold at above 2300 and its five-year high. As I have said, breadth in the NASDAQ has improved.

The DOW was the big loser on the day giving up 65 points or 0.58% to fall to 11,150.70, which is just below its key short-term 20-day moving average, a warning. The S&P 500 lost 2.64 points. The near-tech technical signals for these two indices are the weakest of the four indices.

Small-cap stocks continue to hold after breaking to a new historical high on Wednesday. The Russell 2000 fell 1.58 points or 0.21%, which is positive given the extreme overbought condition. The barometer of small-cap performance is up a healthy 13.28% this year. While impressive, I question whether the index can maintain this rate of appreciation.

In commodities news, the May light crude futures on the NYMEX broke above 67 a barrel on Thursday. The near-term signals look relatively bullish and the minor trend is positive. The breakout materialized after a Rectangle formation at between 61 and 65.50. Oil could move towards the 70 level, last encountered in February, if it can hold at 65.50-66. But watch for some selling pressure as the contract is overbought. High oil prices will pressure stocks.

Trading in the NASDAQ has come in at over 2 billion shares in the last three straight sessions. Trading volume on the NASDAQ came in at about 2.22 billion shares yesterday, above its 5-day and 10-day moving averages of 2.11 billion and 2.18 billion shares, respectively. The strong volume in yesterdays marginal up day is encouraging following a strong volume breakout on Wednesday.

On the NYSE, daily trading picked up yesterday. Trading on Thursday was 1.61 billion shares, above the 5-day and 10-day moving averages of 1.55 billion and 1.55 billion shares, respectively.

The near-term technical picture for the NASDAQ is bullish but is showing some potential weakening. The Relative Strength remains relatively strong, suggesting more gains if it can hold. The index is holding at above its previous pivot point of 2332.95 and its five-year high of 2333, a bullish sign. The index is trading at above its 20-day and 50-day moving averages of 2297 and 22854, respectively.

The MACD continues to flash a moderate buy signal. The MACD trend is negative but has reversed course. The upside break was bullish after largely trading in an intermediate term sideways channel. Now we will see if the NASDAQ can hold and edge higher towards 2366 and 2387. The index is now marginally overbought so watch for some potential selling pressure.

On the blue chip side, the near-term signs for the DOW weakened further and are now moderately bearish. The intermediate trend is bullish but yesterdays break below its 20-day moving average of 11,156 is a warning and could signal further deterioration if it cannot hold. The Relative Strength also fell to below neutral, showing a potential lost of momentum. The MACD turned bearish yesterday and is flashing a moderate sell.

The key for the DOW is whether it can hold at around its 20-day moving average. Indications suggest further weakness, albeit the selling has created a near oversold condition. Failure to hold could drive the DOW down to 11,092, 11,077 and 50-day moving average at 11,016. A rebound could see the DOW move back to above its 20-day moving average and a pivot point at 11,234.

The Bollinger Bands on the DOW are trending upwards and widening, indicating increased volatility in the near-term. Watch this.

On the S&P 500, the near-term picture is neutral to moderately bullish. The Relative Strength weakened yesterday and is marginally above neutral. The index is trading at above its 20-day and 50-day moving averages of 1,294 and 1,283, respectively. The MACD is neutral.

Near-term targets are 1,310 and 1,333. The index needs to hold at its 20-day moving average or we could see weakness.

On the small-cap side, the Russell 2000 is bullish. The Relative Strength is relatively strong but watch if it can hold. The recent break above the previous pivot point of 745.18 was positive. The trend is positive with higher highs and lower lows.

Watch if the Russell 2000 can trend higher but given the buying, the index is extremely overbought. The MACD is positive and appears to have reversed the downtrend.

The next area of resistance for the Russell 2000 is 772 and 803.

The advance-decline line on the NYSE (0.77:1) continues to be mixed, coming in at below 1.0 yesterday. The NASDAQ (1.004:1) managed to hold at above 1.0. The daily AD reading on the NASDAQ has been above 1.0 in 7 of the last 10 sessions. The 5-day moving average for both the NYSE (1.27:1) and NASDAQ (1.42:1) remains above 1.0.

The market is continuing to show bullish sentiment. The new high new low ratio (NHNL) for the NASDAQ came in at above the bullish 70% level for the 14th straight day, coming in at 89.35%. The NHNL ratio on the NYSE (82.69%) has been above 70% for the last 15 straight sessions.

The current technical picture for the four key indexes is as follows:

NASDAQ: Bullish; Relative Strength: Above Neutral; Marginally Overbought

DOW: Moderately Bearish; Relative Strength: Below Neutral; Near Oversold

S&P 500: Neutral to Moderately Bullish; Relative Strength: Neutral

RUSSELL 2000: Bullish; Relative Strength: Relatively Strong; Extremely Overbought

Here is what to watch for on Friday.

The DOW faces more selling pressure as its near-term technical picture is moderately bearish and the weakest of the four indices. Watch for potential support as the index is nearly oversold.

Tech and small-cap stocks continue to show the strongest technical strength but watch the extremely overbought condition in the Russell 2000 and marginally oversold condition on the NASDAQ.

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If you are interested in day trading you first need to know what it is all about and to understand the basics of day trading. For starters, a day trader is a person who is very active in the stock market and makes several trades a day in an attempt to make quick gains by buying and selling stocks in a short time span.

As the market is never the same day to day, no one particular day trading strategy will work each time. To be successful, you first need to understand how the market works and get a feel for the market.

This includes recognizing the stocks’ basic trend, the long and short setups, when to enter a trade, and where to place stops. Another very important basic is how to protect your profits and minimize losses.

Once you have learned the basics and are ready to try your first day trade, here are some tips and guidelines you should keep in mind that is essential to your success as a day trader.

Being a day trader requires a lot of time and practice before you get used to the everyday volatility in the market. Do not expect to become an expert day trader overnight. No matter how many books you have read or day traders you have watched, that will not make you an immediate expert.

There are day trading websites that simulate trading. Practice with their trading platform first before trying out the real thing. It could save you a lot of money and you will learn the ropes faster this way.

If you are ready for real live trading, do not be scared by the thought of losing money. There are ways to minimize your loss such as with stop orders.

If you lose money, do not worry, as some loss is to be expected. Just remember, with increased experience and sensitivity to the market, you will start turning a profit soon.

If you profit large sums of money, stop trading. Do not gamble it away by trying to gain even larger profits. You can always trade another day.

Sometimes the market will not perform as you expected. When you encounter this situation, it is best that you do not trade at all.

Once you gain more experience in day trading, you may be able to predict the direction of a stock price. However, try not to pick top stocks or bottom stocks. This is one of the most common mistakes of a beginner.

If you cannot predict where the market is heading, it is best if you stand aside and wait, or you can always go home and trade again another day.

It is a good idea to record all of your day trading results. This way you can learn what works and what does not, and be more effective in trading.

Observe good traders. Look at how and when they sell or buy. Generally, good day traders often buy on bad news and sell on good news.

Beginners often get emotional in their trades. Avoid this at all cost, stay emotionally detached and professional.

Learn to trust your instincts. Relying too much on analysis may mean letting a few good trades slip away from you.

As you gain experience, you will see that different day trading strategies are required on different days and required on different stocks. Be flexible.

Bad day traders often focus on too many stocks that are not manageable and often lose track on where each stock is heading. It is wise to limit your stocks in manageable numbers.

With patience and practice, you can be successful in day trading, and as your experience grows so do your profits. Everyday you can learn new day trading strategies in the market, which you can use to your advantage.

A day trading robot? Gee Wiz! Sounds like science fiction, right? It did to me just a few years ago. I would have never imagined that such a thing was possible. First of all, I came from a school of thought that believed nothing could be programmed to trade the markets successfully. I strongly believed this and argued with anyone that crossed my path. No automated day trading system could tackle the stock market; impossible! or so I thought. I also said to myself, How could a computer program successfully factor fear and greed [the emotions that move the market] into an equation designed to extract consistent short-term profits from the market each and every day? Well,

…the bad news is that there really isn’t a robot to day trade stocks. Sorry to burst your bubble.

Butthe good news is that there is one that day trades currencies (you know, the great forex market that I love and have bored you over and over with throughout this website?).

No folks; this is not Forex Made Easy. This is Forex Made Easier- An automated day trading system that NOT ONLY comes with a highly sophisticated set of conditions to enter and exit the market, but one that also pulls the trigger (that is, executes the trades) for you, using proper money management without which day trading is doomed to failure. [If you have not read why I strongly believe that the forex (short for foreign exchange) market is the purest and best market to day trade in the world, go to the currency trading section of this website]. This automated system is also known as Forex Robot or FX Bot (for frequently asked questions about the trading robot, click here).

Yes day trading fans. This day trading robot (or bot) not only finds the trades, it takes advantage of them when it finds them.

When the forex trading robot was presented to me for the first time, it was difficult for me to accept the whole concept. I got to admit, I was pretty skeptical. If the explanation wouldn’t have come from the best two money managers and traders I know (and personal friends of mine), I wouldn’t have even listened. But after a while, I was sold. You, Dan? Mr. Day Trading Tutor? Telling us that you believe in a day trading robot after writing an endless amount of information about how people could learn how to day trade, how much you believe in day trading, how you have helped day traders in the past, etc., etc.?

Whoa, whoa!!! People, don’t get so exited. All of these things are still true. There are people that will learn how to day trade successfully and become successful traders. I am still involved on a very limited basis on the training of some day traders. But there are also many people out there that will never succeed as day traders and others that, after having tried it, will realize that it is not for them.

This is the truth; plain and simple. And even if the day trading robot wouldn’t have existed, this would have still been reality. The FX robot is just something extra that I feel can help not just unsuccessful traders, but also investors who can add something different (a new component) to their investment portfolios; and believe me, this is completely different than any investment I have ever seen before.

I created Day Trading Tutor to give you the reality of trading. Well, talking about the trading Bot is an extension of this goal. Since it exists and can help you, I must tell you about it period!

Ladies and gentlemen; I am sorry if I sound really exited about this trading Bot thing so exited it made me that I even became part of it in order to be able to offer it to my clients, friends, and family members (read How are you involved in the day trading Bot and are you doing it just for the money? below. I like to be very clear about the things I say. It makes me sleep peacefully at night. The thing is that I haven’t been part of a great project like this for a long, long time. The money managers and traders that designed and monitor the day trading robot on a daily basis have become personal friends of mine in the last few years. They are great guys and exceptional traders. They have been top-ranked in the past in the forex money management industry. I don’t like recommending traders or money managers to people, but this is an exception.

The robot program rocks!

Are you planning a trip abroad? If you so, you might want to know the current currency exchange rates so you can plan ahead for your financing needs. Your money is usually not worth the same in different countries as it is in the country where you live. Its a good idea to know the value of your pound before you take your trip, as you will have to hand it over to be converted when you reach your destination. You dont want to be shocked when you get there and realize the possibility of an enormous difference in monetary value, and that your money isnt worth close to what is in your own country. Then again, it may end up that you are happily surprised upon discovering that your money is worth double or triple in the country you are going to be visiting than what its worth at home.

A really good source of information for currency exchange rates and other international financial services is www.currencysource.com. They offer information and services for business necessities like buying foreign currency, transferring funds to an overseas bank account, or paying an international sellers invoice. On a personal level, you can send international wire transfers to family or friends abroad, pay overseas college tuitions or put a deposit down on a vacation rental in a foreign country. Another great feature they offer is a currency converter right on their home page. You can find out what your moneys worth in almost any country around world in just a few seconds!

Another reason for being aware of currency exchange rates is for purchasing over seas stocks. When you purchase stock in another country, but are based in your own country, as in online trading for instance, your pound value is probably going to be different than what it is in the country where you are investing. You will want to be informed of the exact currency exchange rates so that you know precisely how much you are paying for that stock. It may seem like a good price, until you convert your pounds. You may end up paying much more than the stock is actually worth, defeating the whole purpose of investing.

For most people when they buy a house it is considered their lifes largest deal. In some cases of structured settlements the compensation and financial considerations for a persons life duration and the total present value of the settlement can reach few millions of pounds. Therefore it is strongly advised to use professional services like annuity consultant and a lawyer specialized in this field in order for you to avoid painful costly mistakes. Here are some tips:

- Think twice before you make a decision. Do you really need that money or you want to feel rich, secure, powerful etc

- Take only part of the money not all of it, in case of an injury claim the Court needs to approve your request, the judge will want to know what do you need the money for.

- Some Funds will try to convince you that due to Inflation and rising cost of living your annuity payments have less and less buying power over time. Remember that if the Structured settlement was done properly it has a cost-of-living adjustment (COLA) feature build into it in order to offset the effects of inflation over time. So the funds claim on this issue is only partially true as the cost of living index is an artificial and biased measure of the actual inflation over time. Still even 70% protection is reasonable.

- When you get a large sum of money take into account that each bank is F.D.I.C. insured for up to 100,000 only! That means that if your sum of money is bigger than that you will need to open additional Accounts in a different banks in order to be covered.

In addition take into account that as long as you deposit your money in C.Ds (e.g. Certificate of Deposit) you are covered, but if you invest your money In fixed income, stocks, bonds, and mutual funds. These securities are NOT F.D.I.C. insured!

- In case you transform Lottery winnings payments or a large sum of money from structured settlement, keep it as discrete as you can, It is not recommended to go and buy a Rolls-Roys or any other flashy car, that will bring the criminals and the charity people to chase you. That might even cause your children start to ask for money. Try to keep it a secret.

- It is a good Idea to get more than one or two offers from various private funds before making a decision, remember you are a very lucrative customer, the funds should fight over you! Dont be timid to negotiate and manipulate them to maximize your money.

Penny stocks represent an excellent investment vehicle for producing gains, while the risks are equally as high. When you finally decide to get involved in penny stocks, to go ‘Beyond the Brink,’ there are some things you need to know.

In fact, whether you have been burned by penny stocks in the past, or have never even invested, the following theories are designed to give you an instant and significant advantage over all those inexperienced and uninformed traders. After all, to make money in stocks someone usually has to be losing money. Which side of the fence do you want to fall on?

Glass Jaw

Lots of people have made lots of money from trading penny stocks. Lots of people have lost plenty, as well. What is the difference between a successful micro-cap trader, and one who continually takes it on the chin?

Uses professional stock picks and research. Does their own due diligence. Observes patience. Takes lessons from past trades and stock activity. Takes lessons from other traders. Decides between 10 stocks at a time.

Uses tips at work, rumors, and so-called ‘inside scoops’ to pick stocks. Doesn’t investigate financials and corporate position. Falls victim to negative emotions like greed, anger, and desperation. Makes the same mistakes more than once. Looks at one stock alone on its own situation.

So Let’s Learn

The fact that you have taken the time to review this feature demonstrates that you have the characteristics of a successful trader, specifically the willingness to learn from experts and the experiences of other traders.
So let’s learn. As mentioned above, you should always examine groups of stocks together when looking for a new issue to invest in. For example, make a chart and write down the revenues of each. In the next column list the earnings. Follow this by each of the subsequent criteria you think are important. With all of the data on one table and available at a glance, you can easily get a clear picture of which are the one or two strongest companies from your pool of potential investments.

However, understand that stock prices do not necessarily act in concert with the underlying fundamentals of a company. For example, there is nothing saying that the stock of the worst company on your list won’t out perform the top ranked one.

For that reason you should also include factors such as trading volatility, your opinion of a potential break-through due to some new product, potential positive press releases, etc… This method is not intended to reveal the best stock, but instead to give you additional clarity about which are the best few and worst few according to your own weighting of the various factors you have chosen.

Available Advantages

Get a discount broker. Monitor your portfolio online, do your research online (and offline), and place your trades online. Embrace the technology, because it provides superior advantages all across the board. You can screen stocks, put those into comparative charts, instantly access the corporate press releases, check the latest industry news, and then place your trade… all for about 20.
Then you can monitor your trade order fulfillment, verify that the money and shares traded hands, track the progress of the stocks, get instant alerts for press releases… It is truly endless and complete, and each step that you take full advantage of leaves other traders one step behind you.

Keep small amounts of money in each stock, and only ‘risk’ money for penny stocks. While these low-priced, volatile investments can produce some truly incredible gains, they usually bounce among all sorts of price ranges.
On a related note, if you get ‘freaked out’ or worried about a stock you hold, you should consider selling your position. Try to invest in solid penny stock companies that have a low share price because they are small or undiscovered, not because they are having business troubles.

Be sure to read our related articles Falling in Hate, Fools Rush In, and Trading Myths, and our tools section on Choosing a Broker.

Beyond… And After That

Some of the most successful traders have a few things in common. Firstly, they have made some major trading mistakes in their day. However, they learned more from these mistakes than they ever did from any of their great trades. Don’t squander your failures by trying to put them behind you.

Secondly, keep a journal with dates, specific trade amounts and prices, and even the stocks you were thinking of investing in but didn’t. You can use this for a hundred different purposes as you become a more advanced trader, such as seeing opportunities you missed, or learning that your strategies are valid, or just to monitor your improvement as you become more experienced from month to month.

Beta in the Context of the Capital Asset Pricing Model

The economic model used for securities valuation and stocks are a part of the Capital Asset Pricing Model in terms of the expected return and comparative risk. According to the login which is fundamental for CAPM, shareholders are willing to take on extra risk only in case of additional expected return. As a result, the price for stock is negotiated of the free of risk security added to the risk premium which results from additional risk.

Formula of CAPM is Probable Security Return = Free of Risk Return + Beta * Probable Promote Risk Premium, Beta in this formula is the general risk which results from savings in a large market, for example, New York Stock Exchange.

In case of CAPM, Beta can receive a definition of the stock instability of a certain investment selection in relation to the economy. According to the definition, Beta of a market is 1.0, where separate stocks are assessed against the Betas market value. Risks which are associated with savings rise with Beta and, the other way, reduce if investment is not as risky. Beta, as the significant element of CAPM, expands proportionately with the price of funds discount rate, while the reduction rate is depressingly related with the current value of upcoming cash flows. Thats why, Beta is the main element in valuation of the company.

Beta coefficient is resulting from the analysis of linear regression. Beta coefficient is estimated from the income of a portfolio during a specific period of time and the profits from distinct asset during a particular period of time. The drop line consequent is referred to like the Security Characteristic Line. Betas are usually calculated by deep-rooted brokerage companies that are later published in a book of beta. It must be noted, that admission to such book if oftentimes limited to usual investors. Nevertheless, other online sources like Yahoo Finance as well have beta coefficients published and calculated. The value of Beta of 0.00 means that the stock is fresh and has no historic performance.

Forex trading systems are all about getting investments into the foreign markets. Foreign exchange markets are abbreviated to be called Forex. The worldwide trading of stocks in companies and in products happen over the Forex trading system. There are over a trillion pounds traded on the Forex market everyday. You can learn to chart and follow markets in the Forex trade world on your own, or you can rely on a broker as you would in the New York stock exchange. The Forex trading systems are similar in method, but each is a proven method of how to make money, how to learn about companies and how to follow what is going on with the money you are investing in the Forex trading markets.

You can live anywhere in the world and trade stocks and investments in the companies that are involved in the Forex markets. There are no limitations to the money you can make, or the money you can lose. The Forex markets can be tapped into online, over the phone or by contacting a broker in person. If you are interested in making money, you can do it on the Forex market, without having to have employees, or a broker to do this. You can get involved in learning about the investments in the Forex markets, and take on the responsibility for your own money, and making your own money. Many are starting their own businesses using their education and experience on the Forex market to make money.

The Forex market is one that is world wide, so there is sure to be something of interest to just about anyone that wants to expand their investments and expand their learning about money in the world wide markets. There are many experts in the Forex markets, and using the Forex trading system that you feel most comfortable with, you can be a Forex market expert as well.

There are no go betweens, such as large banks or such when you are involved in the Forex market. There are no need for fees and transaction fees when you do your own trading on the Forex markets. You can learn the Forex trading system that best suits your learning needs, and follow it to chart companies, chart growths, and to invest in companies that have a solid future. There are companies and markets through out the world that you can invest with, to increase your wealth and your investment portfolio.

A few different regions of trading exist in the Forex markets, with sessions in Tokyo, Asia Pacific, and in the Americas. Trading is always non-stop, and moving from London to New York, to Tokyo and so on again and again. You can invest in the US pound, the Euro, the Japanese Yen, or in Swiss Franc among others.
You can find more information on http:www.broker-trading-system.com about Forex trading systems.

Investors who bought during the top of the frothy commodities rally are now panicking or kicking themselves. Neither activity helps an investor or trader think straight. Below are a few tips in dealing with the current market shakeout.

1.If you believe you invested in the right stock(s), then turn off your computer and do something enjoyable. Exercise is a great stress reliever. The market has already begun its shakeout. If you didnt get stopped out, or failed to place earlier stops, your best opportunity lays ahead in picking up additional shares at a much lower price. Most of the experts weve interviewed tell us the next rally should start sometime between late July and Labor Day. In an attempt to interview the uranium guru James Dines in late May, we were told, Call back in a couple of months. That was a helpful clue that the markets were less than exciting. Mr. Dines is often eager to be interviewed, but recently he was not.

2.Do you believe the fundamentals which engendered the commodities boom have changed? If they havent, then the bullishness is only taking a breather. We dont see any fundamental change in the markets. Russia still wants nuclear power, and its oil production may be peaking. China hasnt announced the end of its nuclear expansion program. India wants to spend 40 billion on new nuclear reactors. If you are invested in uranium stocks, spot uranium jumped another pound to 45pound this past week. Hardly the end of the bull market.

3.If you worry about your investment in one stock or another, then stop watching the ticker and focus on the company fundamentals. Is the story still true or has it changed? See #7 A, B and C below.

4.Theres an old clich that the time to buy is when you feel like dumping everything you own in the category. At the exact moment you want to sell your entire portfolio of uranium stocks, it may be wiser to add to your holdings. This applies mainly to the retail investor. Most of the professionals did dump at the top and are now slowly accumulating the shares of the nave who waited until the washout to start selling off.

5.Has a major, earth-shattering event occurred? The last bull cycle in uranium ended with Three Mile Island (TMI). The last decent rally in the precious metals markets fell off a cliff after it was discovered Bre-X Minerals had perpetrated a fraud about its gold discovery in Indonesia. Something significant and newsworthy always transpires, and it is also far-reaching. That is the trigger. As with TMI and Bre-X, those were the first shots which launched a later chain reaction to end those bull markets.

6.Before pulling the sell trigger, ask yourself: Do I really want to give up these shares to a bargain basement hunter, who will make a killing on my losses?

7.

A)How much cash does the company have in the bank? During shakeouts, cash is king. Prescient companies, which completed their financings during the recent and robust rally, are sitting pretty. They can weather the short-term storm and are well-oiled to move forward when this correction bottoms and reverses. Those companies are the strongest ones to check out when this correction looks gloomiest.

B)Has the management remained the same? Unless the top financial andor technical people blew out the door, in recent weeks, the story probably hasnt changed much. Companies which built a strong technical team are resilient and powerful. They will move forward.

C)Have the properties come up dry? One of the reasons you invested in a uranium company was because it announced it had pounds in the ground. Some companies have more than others. Some went to the expense and trouble of completing a National Instrument 43-101, which independently confirmed the quantity and quality of the uranium resource. If that changed and the company announced, Sorry, nothing there after all, or announced, Hey, we were kidding, thats one thing. If you havent heard that, or read a news release announcing that, then the uranium didnt walk away or move onto a competitors property. Its still there.

Next time, when the markets are racing higher, and you feel like you won the lottery, consider this bit of biblical advice. The old joke goes, When did Noah build his ark? The answer of course is: Before it began to rain.

Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles.

1.Penny Stocks are a penny for a reason.
While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker’s money for an IPO. This doesn’t make them a bad investment, but it should make you be realistic about the kind of company that you are investing in.

2.Trading Volumes
Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn’t trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding “dead money”, where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price.

3.Does the company know how to make a profit?
While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?

If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return.

4.Have an entry and exit plan – and stick to it.
Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at 0.10 and sell it at 0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is 10 000, a 20% loss is a 2000 loss. Do this 5 times and you’re out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen.

If your plan was to sell at 0.12 and it jumps to 0.13, either take the 30% gain, or better still, place your stop at 0.12. Lock in your profits while not capping the upside potential.

5.How did you find out about the stock?
Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here.

Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.

How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You’ll start to notice quickly if you have subscribed to a good newsletter or not.

One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you’ll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?