Buy Penny Stocks Guide

Knowing what are the best penny stocks to buy at any given time is not always easy to say the least.  In fact there is no sure fire way to pick the right stocks at the right time all the time.  If there were, we’d all be rich, but the truth is choosing the top penny stocks to buy is more of a best guess rather than a solid formula.

Having said that however, don’t let this deter you as there are a number of indicators you can factor in when looking for hot penny stocks which can significantly increase your rate of picking profitable penny stocks versus losing ones.  You should never just use one indicator when picking stocks however.  All indicators should be looked at together as a whole to more accurately analyze a penny stock’s potential.  The following are some indicators to consider when penny stock investing:

Strong Price Movement – If a stock has large percentage price gains with heavy transactional volume over the course of a number of days, this could be an indicator that the stock is starting to trend up and build momentum.

ROE (Return On Equity) – ROE, often considered the most important ratio in stock analysis is essentially the quantity of net income returned as a percentage of shareholders equity (SE).  It’s calculated by dividing the net income by shareholders equity. Penny stocks with a positive ROE no matter how small indicates the company has value and is turning a profit.   In other words it’s a sign of quality.

Technical Analysis Indicators – Technical Analysis is a way to predict a stock’s future performance based on past performance.  One of the most important indicators is the MACD (Moving Average Convergence / Divergence) ratio.  The MACD ratio measures whether a stock is trending up or down.  The idea is that if a stock is trending up it has a tendency to continue that trend until of course the trend starts to change (which the MACD can also indicate).  The most common parameters used in the MACD ratio are (12,26,9).  Another popular indicator are moving averages, particularly the 50 day and 200 day moving averages. It is believed that if the stock is above the 50 day, it’s a positive sign and if the 50 day is above the 200 day, even more so.

Insider Buying – When company insiders are buying their own company’s stock, it’s a very positive indicator.  The reason is quite simple.  They believe in their company and the future growth of the stock; why else would they be buying?  And who knows the true financial condition of a company better than those running it?  Enough said.

These indicators will go a long way in helping you find the very best penny stocks to buy with the highest growth potential.  Here’s to your financial success.