The first thing I want to do is to explain what this article will cover. I will set out the exact strategy I am using to invest and profit from penny stocks, despite the recently crash in the stock markets. I have made over $3,000 per month for the last 3 months by trading penny stock in my spare time, not bad for a relative beginner. I will explain how i am doing this below.
Many people are saying that now is a terrible time to be investing in the stock markets and to an extent they are right. I would not go near any banking stocks if you paid me however there are still many more tremendous investment options available that are making me money at the minute.
Due to the high correlation between all of the huge companies in the major stock indices such as the Dow Jones or the FTSE my current strategy avoids these large cap companies. Instead I have been buying stocks in penny stocks. These are much smaller companies that are much less affected by the big falls in the prices of the big corporates. In addition as many professional investment managers sell their positions in the big corporates more and more are diverting their funds into these smaller firms creating rising prices.
The thing that puts most people off trading penny stocks is the lack of information out there on small companies. Where do you begin? I had exactly this problem until I stumbled across a service that changed my strategy for good. I subscribed to a service that basically runs a computer program over a database of literally thousands of penny stocks. As it goes it does hundreds of calculations and identifies those where the relative indicators show the stock is undervalued or likely to rise in price. In effect it gives me a shortlist of great stock from which to invest.
I gave worked out that I would still have made money if i had invested in all of the recommendations I have received however I have added an extra layer on to the top which has meant I have made much more money. I work through each of the short listed stocks and scour the internet for customer reviews, appraise their websites, look for broker recommendations, check forum postings etc. Once I have dome this i am relatively quickly able to form an opinion about the viability of the stock.
My final caveat is that I only actually go ahead and make the investment if i understand the companies business model. For example if they make some obscure aerospace components i know nothing about i steer clear. If they make sports equipment that i know and can appraise i will go ahead and invest.