Is stock investing enriched with trading the holy grail for investors? At least some sort of a “trading investment style” is the right direction for value investors who are ready for further development. For “real” stocks that could be achieved by scanning the market for growth stocks that have fallen in price. This would be even doable for automated trading with a system that merges technical and fundamental information.
Two reasons for the moderate valuation are possible. The whole market could have tanked and as usual high valuations of highflyers get trimmed down. Even the best and most promising stocks are vulnerable. The other reason could be the company itself. One misstep, a singular glitch in the earnings history and prices often drop likes stones.
The penny stock market has here an advantage. You don’t have to wait for a bear market or a growth company’s earnings miss. There are always hundreds of small companies with prices much lower than their historic high. This is the El Dorado of the stock picker. These are the stocks with potential. It doesn’t matter really what the fundamental situation is. You don’t believe that?
Just look at well known stocks with thousand times the market cap of those under the radar picks. Relatively seen Wall Street knows everything about such a company and yet it is all still speculation. Your trade will yield a gain with a fifty percent probability. If you have a trading system with a tight stop loss technique you will even manage to have more than those half of losers. Of course, on average they are compensated by bigger gains.
But the point is the unpredictability of everything that can be called a trade or an investment. This uncertainty of what will happen is neither bigger nor smaller in the penny stock market. Small stocks with lesser known fundamentals behave similar to bigger stocks. They go up and down. A safe investment or a wise trade is an illusion.
So, why not try it where the volatility is? The magic trading formula for the penny stock markets equates to:
- Price much lower than the historic high
- Some recent volume surge or rumor activity
- A fundamental story that is sound in principal
The easiest way to implement this semiautomated trading signal system is to find a penny stock newsletter making such suggestions. Important is more an honest attempt of the writer to come up with interesting situations than his historic track record of good picks.
Yes, that’s right! Track records are for the trash bin. You will never know whether and how they have been faked anyway. Finding stock situations with potential like the described one above and than trading them by putting only a fraction of your capital into each trade may lead to obscene wealth.