Cheap Stock Picks - Where Do You Start Building Your List

If you are looking for the best cheap stock picks because you want to dabble in trading lower-cost shares, there are online brokerage websites that offer plenty of free advice. You can direct your own trading for a set amount per transaction- some of them offering promos around $10 to $20 per 100 shares bought or sold. The trick is finding the cheap stock picks that are going to make you a profit by generating enough to pay your purchasing and selling commission or trading fee and enough to show an increase in your initial investment.

When it comes to cheap stock picks, you can do research on your own by looking for the best price-to-earnings ratios, underlying fundamentals of the company's products and analyzing their cash flow. There are penny stock brokers that have already done this, but keep in mind that a run-up in price can be the result of "buy" recommendations and unless you get in early, the shares may be over-priced. Timing is everything, even when dealing in the cheap stock picks that are under $5 per share. You can double your investment overnight or you can lose it all, just as quickly.

For this reason, you may want to consider the cheap stock picks that maintain a steady price, moving a point or two each day, but you still need to keep your eye on the trading volume. Those that are frequently bought and sold can have a more volatile share price, but you can make money quickly and high trading volume allows your "buy" or "sell" order to be executed at the price you expect. It doesn't hurt to spread your funds among several cheap stock picks, especially when you are first getting started. This diversity allows you to at least make money on certain selections.

Understanding the basics of investing can be learned from books, tutorials, newsletters and videos, but finding the cheap stock picks that have good potential demands other technology. There are analytical software programs, where all the analysis is done for you. These stock-picker software programs are affordable and might be the best way for a first-time trader to get started. It is important you purchase the stock-picker programs specific to "penny stocks", since the higher-valued shares behave differently-following the general upward and downward trends of the NYSE, regardless.

It's possible to find your own lower-cost shares to invest in, if you understand how to look for the basic factors and there are plenty of online investment tools to help you understand the important fundamentals. The performance of the company or the "return-on-equity" can help you see how a business is operating, in comparison to others in the industry. Determining the debt-to-equity ratio can help you determine if a company has an excessively high level of debt in comparison to their equity, while analyzing the profit margins helps predict profitability.

These are just a few of the things to look for, but it is important to understand what a company does, when you are analyzing your cheap stock picks. If it doesn't make sense to you, it might be better to get some kind of expert advice before investing and you can find it on the Internet.