How To Find The Right Hot Stocks to Buy Today?

Every time we are asked about the hot stocks to buy by family and friends, we must take a few minutes to compose the appropriate reply. We must first emphasize that the hot stocks being referred to here are the so-called penny shares or microcap stocks.

Why the hesitation? Well, it has everything to do with the fact that penny shares are not exactly the most predictable classes of market securities. These shares are, in fact, the most volatile securities man has ever invented in the history of trading. Their values can rise up to a thousand percent over the original price today and then plummet to become worthless tomorrow.

As a matter of fact, even seasoned stock traders and investors will take days to pinpoint the hot stocks to buy. Many steps from fundamental analysis to technical analysis must be performed before any recommendations can be made. Otherwise, the money invested on the penny shares will go up in smoke.

We also cannot overemphasize the fact that microcap shares are not placed on Earth, so to speak, for long-term investment purposes. Instead, these are meant to be traded over a short-term period precisely because of their highly volatile and, thus, highly risky nature.

With that being said, here are a few steps that can lead to the hot stocks to buy in the market at whatever time you choose to plunge into trading penny shares. You must develop your own system, however, with the following suggestions as your first basis.

First, always set the parameters of the desired trade. This is called a trading plan or trading system wherein the decision to buy or sell stocks are based on objective factors - not emotions, not the hot tips from family and friends, and not the enthusiastic recommendations from self-proclaimed financial gurus.

Each individual will have a unique set of trading goals as a way to build up their wealth portfolio. You must then identify your own wealth goals, formulate the best strategies to achieve these objectives and then follow the plan to the letter.

For example, if you plan is to earn 50% over your initial investment on the penny stocks, then sell the shares when your expected profits hit 50%. This is true for losses as well.

Or if your definition of hot stocks to buy is when the price per share reaches $5, then purchase the shares. Of course, the assumption here is that all the other factors that affect your buying decision have been satisfactorily met.

Second, always do your homework on the stocks being considered for purchase. Learn to differentiate between reliable tips and unreliable marketing hype. Learn to use the financial ratios in fundamental analysis. Learn to pull together into one cohesive picture the factors in technical analysis.

Learn all you can, indeed, about the company and the issued shares in relation to the bigger picture of the industry and the economy. You will soon find out that trading in microcap shares and even blue-chip shares is a lesson in continuing education simply because the stock market is in a state of continuing change.

So, whenever someone asks you about the hot stocks to buy, take your time in answering the question. You may be leading that person into financial ruin with a hasty answer about Company A being the best over Company Z.