(ThyBlackMan.com) It’s no secret that while penny stocks have potential for huge rewards, they also come with a large amount of risk.
Fortunately, you can assess a penny stock quickly by scanning them for certain qualities and traits that indicate whether the company of that stock has a bright future or not.
Here are the top five essential qualities to look for in penny stocks:
Stock Price Volatility
First, let’s talk about volatility. The key to winning at penny stock trading is to select company that are moving rapidly versus stocks
that are either moving slowly or are on a downtrend. In general, if a company is displaying little to no movement in stock price over a long period of time, you should probably keep looking.
High Trading Volume
The trading volume of a company will increase dramatically when something big and positive happens to that company (such as an increase in sales or investments from professionals). The spike will then continue to increase until the demand has subsided, which could be in anywhere from a single day to several weeks or even months.
Look at whether the trading volume of the penny stock has doubled while the price simultaneously increases. If this happens, it’s a great time to invest your money.
Increased Market Share
The market share of a company is also something you must pay close attention to when investing in penny stocks. An increased market share indicates that a company is having increased sales and/or greater knowledge from the general public. In fact, market share gains are an easier way to predict the future of a company versus the company’s volatility.
Social Buzz
How often do you hear about the company you are considering investing it? Do you ever see their name pop up in social media? Is there a general hype surrounding them? The more you hear about the company in your day-to-day life, the more it indicates they are gaining acceptance from the public or at least from their customer base.
Attention From Professional Investors
Are professional investors paying any attention to the company? Remember that professional investors have greater knowledge about this company than you do and also analyze it more in-depth.
If you don’t see very many professionals investing their money into this company, it could be a cause for concern. On the other hand, if they are investing in it, it tells you that they believe in this company and are willing to risk their money.
The best professionals to pay attention to in this regard will be mutual fund managers, hedge fund managers, and industry analysts. You should be able to find out if they are investing in the company or not by doing a quick perusal online.
Essential Qualities To Look For In Penny Stocks
Penny stock trading is something that does require a learning curve, but by looking for the above qualities that we have discussed you’ll be far ahead of the game over other new investors.
Staff Writer; Calvin Moore