Penny Stocks aren't always valued at a penny per share. There are some that may be as high as a dollar. If the amount of money that you have available for stock trading is limited investing in penny stocks could be a smart stock investment policy for you.
If you purchased 1000 shares of a stock at 10¢ per share, and that stock went to 15¢ per share, your $100 becomes $150 or a cool 50% profit. If that 10¢ stock instead went to a dollar or even $10.00 per share, your earnings would look amazing certainly.
To find the true company, there are a few things you need to search for.
Do some research and try to find out how many shares the company holds in its float. The float is the number of shares that are currently being traded. Companies listed on the Pink Sheets generally do not officially report this number to the public, but with a little research, you can discover it. It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites.
You can also find the information on message boards or forums where penny stocks traders chat with each other. Look for companies that have approximately 5 to 100 million shares in their float.
Before buying penny stocks from a new company, you should ensure the following things. These are barriers to entry, patents, and consumer demand. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful:
1) Barriers to Entry: Make certain whether there are any obstacles that will make it difficult for the company to sell its products or services.
2) Patents: Is the product that the company is going to sell original? A patent will stop other companies from producing the exact same product.
3) Demand of the product: you should also ensure whether there will be a demand for what the company is selling? Every so often a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is.