Four Things to Avoid When Picking the Right Penny Stocks

There are lots of great penny stock tips out there that will tell you why you should get into penny stocks and what to look for. But, that’s not all. You have to know what to avoid too!

Here are four things you want to make sure you avoid when you’re deciding which penny stocks to buy.

Businesses That Can’t Be Searched on the Internet

When you’re first faced with a stock that you’re interested in, head on over to Google and do a quick search to see if you can find that business on the internet.

You should be able to find information about the business on at least one website:

  • See if they have a Facebook page
  • Do they have a Twitter presence?
  • Quality businesses will have their own website
  • Are they listed in a directory, like Yahoo or the Better Business Bureau?

Even if they show up on your Google search with a location, that’s a good indication that their penny stock is worth your time. If you are having a hard time learning more about the business, it’s a good idea to avoid the stock.

Stocks That Move Slowly or Downtrend for Months at a Time

It’s important to take a look at volatility when investing in penny stocks. Unfortunately, many people think a stock that moves too fast is fishy. After all, you’ve probably heard the advice that the stock market isn’t going to make your rich overnight.

Although that’s true, that doesn’t mean you want to look for the slowest penny stock out there. Avoid stocks that barely go up and down at all from day to day, and definitely avoid ones that downtrend for months at a time.

Stocks That Don’t Change Hands Multiple Times Each Day

One of the biggest problems associated with penny stocks is the fact that they can be difficult to sell. You don’t want to get stuck with a few penny stocks because you can’t find anyone who wants to buy!

You can reduce the likelihood of this possibility by looking to see how frequently, and at what volume, the penny stock is traded. If under 200,000 shares are traded each day, or if days go by without any trading at all, you should avoid buying the stock.

Not Listening to What Others Have to Say

You’d be remiss if you didn’t at least look into what others are saying. People make a living out of discovering trends and sharing them with other people. You may find a really hot penny stock that you otherwise didn’t know existed.

However, that doesn’t mean you should follow the advice of others blindly. Do your own research and follow your gut. Just because the stock isn’t on anyone’s radar yet doesn’t mean it won’t be in the future.

Not only should you know what to look for, it’s a good idea to know what to avoid too. With these four tips, you can avoid the penny stocks that won’t pay out and have more success finding the ones that will.

 

 

 

 

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