How To Pick Penny Stocks

If you are just entering into the penny stock market

, then you may be overwhelmed by the number of stock selections available. How do you best pick a penny stock and what are the tools available to help with these selections?

There are three fundamental steps you should take to help with you penny stock selection. Picking penny stocks can be a difficult exercise, since there is often little public information available about these businesses, and they have the reputation of having their value artificially inflated through mechanisms such as paid endorsements. Here are some tips to help sort through the hype and make some sound selections:

1) Use a penny stock screener. There are many different stock screening software programs available, some which are free and others which require a one time or monthly fee. Computer stock screening software is inherently unbiased, and will save you hours of research time by being able to quickly sort stocks according to the criteria you choose.

2) Check out what the Security and Exchange Commission has to say about a particular stock. Once you have narrowed down your choices using the stock screening software of your choosing, your next step is to head over to the SEC website and check out their records on the companies you are considering. This is a free service, and you will learn a lot about the company's reputation, history and performance.

3) Check out what other people have to say about the stock. It is also good to check and see what kind of public recommendations are being made about the stock and the company. You need, however, to be very careful about doing this since as previously mentioned, sometimes companies pay individuals to give positive recommendations or create hype regarding their stock offerings. If you notice a sudden surge of message board posting about a particular stock, you should probably stay away from that stock, since its value is likely artificially inflated. However, you may find some important, reputable recommendations from online sources.

by: Bill Boor

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