The Fundamentals of Good Penny Stocks

You may be wondering what constitutes a penny stock. Some people are confused by the definition. Technically, penny stocks are any shares that trade outside of the normally regulated stock exchanges. So you won't find these on the NYSE, the NASDAQ, or AMEX.

This may make you feel shaky, because there's no set price at which these are trading. There can be many prices for a given stock at a point in time. Of course, that very lack of regulation can make them a wonderful buy if you get in at the right moment in time. That's where the opportunity for a windfall comes in.

They are sometimes seen as volatile, but remember that volatility goes both ways. You can make it work for you. So if you have the money to purchase these penny stocks and the money and time available to hold them until the time is right, you might want to consider this kind of trading.

Of course, as in anything having to do with the stock market, luck plays a major role also. You do your research, buy and sell as your information and your intuition guides, and then rely on all of this coming together at the right moment.

One right moment for buying is when a company is just starting out. If you like what the company is doing in terms of its products, services, and management, you could invest when the price is very low. If you hold it for a while, you'll find that your investment has paid off nicely over time.

When you're deciding what to purchase, be aware that there are scams. Sometimes people in the know artificially raise the prices so that they can sell them at a high price. This negates the natural ability of the market to behave in a predictable way.

They call these schemes pump and dump, and you'll have to do your research into a stock's patterns to make sure that the one you're considering isn't part of such a thing.

Consult with our experts at Paradigm Capital Management if you want to learn more. We at Paradigm Capital Management are focused on a single minded purpose: To ensure that our clients have the best information on which to base intelligent financial decisions in pursuit of superior investment performance.

For more details, visit here: http://www.paradigmcapital.com/