When is the Best Time to Buy Penny Stocks?

There are two schools of thought that attempt to determine when the best time it is to buy penny stocks, and these are the Fundamental Analysis School and the Technical Analysis School. If you go with the first one, you will likely not focus much on the stock’s current price. Rather, you would concentrate on products and profitability.

Basically, you would focus on the comparative strength and profitability of the company against competitors. Conversely, those who follow the Technical Analysis School of thought don’t focus on analyst statements and the historic numbers in reports made to the SEC. Instead, they tend to focus on the current stock price. Actually, both are legitimate ways to a successful investment. It’s all in a matter of having the right approach to your investment.

For beginners, get to know the trend. Look at the direction at which a stock is heading. For instance, has it been continuously going up or steady? It is said that a stock will likely continue in the same direction it is presently following, so if you analyze a historical chart and notice that the stock price in the long run tends to rise, you lean towards it. On the other hand, a downtrend would be viewed negatively.

This is where you need more information. Inside information is available in numerous sources including the Internet. However, be careful about this. Online services don’t necessarily tell you the best time to buy penny stocks, but they can be used as guides and a way to keep updated. The more you know, the more experienced you are and therefore better at analyzing and predicting the market.

By viewing a company’s financial reports made to the SEC, you can measure their financial value. You should be able to catch on important trends and weaknesses. Current news is essential to your decision regarding the future of that company and in fact has a considerable effect on most companies.

Immerse yourself in what analysts are saying about a particular company. Check if they are good or bad, and how many of them are observing the stock. You should even see to it if these analysts have actually changed their ratings in the long run.

Considering the nature of the micro cap companies, gaining positive returns is highly speculative and investing in penny stock carries a high level of risk. Online investment brokers or advisers may provide hot penny stock picks, but if you were to buy penny stock using their services such recommendations should be used only as a guide.

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