Free Penny Stock Picks - How To Pick Penny Stocks That Don't Suck

You've heard the stories of people making tons of money trading hot penny stocks. I'm sure you have also read about penny stock scams or all the warnings that go along with it. So, the question is how do you pick the best penny stocks while avoiding the losers? Lets find out.

Penny stocks are shares of stocks issued by small companies that are looking to raise capital to fund their growth and increase their cash flow. If you get in on these companies early enough and hold onto the investment for a good amount of time, your investment can pay off very well. However there are three different requirements for a successful trade - (1) picking the right penny stock (2) buying the stock at the right time and (3) selling the stock at the right time.

In order to choose a growth penny stock it helps to know something about the industry that the company operates in. You should be able to figure out how the company makes money, what its growth prospects are in the near to medium term as well as how good the management or leadership in the company is. Without the right combination of these elements, the company will never really take off.

Even with the right combination of the above characteristics, you will have to get in at the right price and know when to sell in order to seal in your profits. When you are tracking a growth stock, there will be different price points at which you can buy this stock. As long as you buy the stock on a pullback or a drop in price due to overall market conditions you will be in good shape. Know when to sell the stock? If the company prospects are good and the the stocks is a growth stock, you should cash in your profits at different price points. Unless there is a real need to do so, you shouldnt have to sell all your shares of stock at the same time. If the stock doubles, you must sell half of your shares of stock. In this way you have preserved your principal and now you are playing with the 'house's money'. Always plan your trades in advance. If you don't plan your buy and sell points in advance there is a good chance you could get too greedy when the price goes up real fast or get fearful when the price tanks. To keep your emotions under control use limit orders and stop loss orders to limit the downside.

Final word of advice - dont get greedy and dont be fearful. Keep a trading journal so that you can record your successes and your losses. In this way you'll learn more about your trading style and make better penny stock picks with experience.