What Makes Great Penny Stocks Different?

There are differences between great penny stocks and the ones that are money-losers. Just like the companies that issue these microcap equities, the share prices reflect their earnings trends and product or service demand. For this reason, you should know what a company does to make a profit, before you purchase shares of equity, even if they are cheaply priced.

  • A great penny stock may be a defined as shares of ownership in a company that earns money consistently, has a great product innovation that's in high demand and they have the capability to continue to grow.
  • When it comes to great penny stocks, the most profitable investors will tell you these are to be a short-term holding and not necessarily a long-term investment. This is because many of the choices are younger start-up businesses or the older businesses that are encountering problems, resulting in cheap share prices.
  • Micro-cap share prices are tied to earnings, sales and the net worth of the company you are investing in. As the value of the company goes up, the share prices go up, too. There are some great penny stocks that rise in share price, based on anticipation of earnings, but the high volume shares can fluctuate greatly in price.
  • Demand is a driver of share price, but so are press releases, hyped-up broker recommendations and other outside factors. Finding a great penny stock means purchasing it right before the rest of the investors discover it and selling it, once it has hit a certain profit range.

There are many day traders that play the great penny stocks to make money, quickly. Consider market shares that cost 45 cents and double to 90 cents, within the same week. This 45 cent increase might not mean much on the surface, but you will double your money, if you do this consistently. It's more difficult and takes more time to double your money with the blue chip shares, however.

For this reason, it's important to discover the next great penny stock, ride the upward trends and sell before the profit-taking is in full swing. Day traders can do this, within a few hours on the same day. You may be asking how they are able to easily identify the great penny stocks they purchase, but many of them have stock-picking software to help them. In addition, they may subscribe to broker newsletters, read investment strategy books or watch video tutorials. There are helpful investment tools that can be found on financial websites.

It's difficult to say all the methods a smart investor will use, but knowing when to buy and sell a great penny stock is what makes the difference in a profitable investor and one that loses money. Some people hold their shares too long and their profits are wiped out. Others will hold onto a losing investment, hoping it will recuperate from losses, but it may end up worthless. Great penny stocks offer more opportunity to make a profit and they are typically, higher volume shares of a stable company with good underlying fundamentals.