How to Develop a Penny Stock Watchlist

If you trade stocks, whether it's penny stocks or not, you should be familiar with the term "watchlist". Having one is essential for daytraders or swingtraders to be able to spot optimal entry points for buying or shorting a stock. Without it, you are just randomly searching through the market in an unprepared state of mind. Preparation is the key to success in every endeavor, and making a watchlist of stocks is some of the best preparation you can do as a trader.

For example, let's take a hypothetical situation of 2 traders. 1 had a watchlist of 10 stocks, the other did not. The person that was prepared spotted 3 high probability setups out of the 10 stocks he was watching. He made profits on 2 and was stopped out for a minimal loss on the third. The trader with no watchlist goes through the message boards and pump newsletters to try to find something to trade, but misses a morning breakout in a penny stock simply due to the fact that he did not recognize the previous day's action in that stock that would have warranted placing it in a watchlist. Out of frustration, trader 2 buys the penny stock at the high of the day and has to sell with a loss the next day or become a long term bagholder and pray for a rebound in the stock over the ensuing days/weeks.

Watchlist preparation has helped me spot trades that have doubled my money or more in less than a week, sometimes overnight. Of course there is a certain knack to developing watch lists, depending on what types of stocks you like to trade or are interested in trading. This involves technical analysis of charts, which is fairly easy to do in my opinion if you have a good head on your shoulders and you are hungry to make money trading.

Some technical indicators that will help you develop a good watch list are: above average volume, parabolic sar buy or sell signals, stocks moving above or below the 50 day moving average, new 52 week high or low and pincher play setups that involve the adx and ppo indicators.

Fundamental analysis can help you develop watch lists also, such earnings announcement dates which can induce major volatility into a stock.

If you're asking the question, "How do you buy stocks online?" Then you've come to the right place. Not only will I tell you exactly how to buy stocks online, but I'll give you advice that is far more valuable than the simple, actionable answer. Please be sure to read the last section of this article as it is vital to your stock investing future.

So... How Do You Buy Stocks, You Ask?

Create An Investment Account

The very first step is to create a separate banking account from your primary share draft and savings accounts. You really don't want to intermingle these different bank accounts. You want to isolate your investing money from the money you secure in your savings and you use for living in your checking account. Move however much money you plan on investing into this separate account.

I strongly encourage you to have at least a couple thousand dollars in this account. If you can't safely put that much money in an investment account, you probably shouldn't be messing with buying stocks just yet.

Now you'll see why we setup that investment account. Go to the website of an established, trustworthy stock broker and apply for a new account. Don't go cheap if you're new to buying stocks. You'll regret it. Go with a well-known full service brokerage firm. Fidelity and Charles Schwab are often among the best rated, but do some research of your own before you commit.

To register your account, you'll need to offer a bank account to which you will connect your brokerage account. It often will take a couple days for your accounts to be connected, at which point a selected amount of money will be moved from your bank account to your broker's account.

There is the universe and more between this step and the next step, but for now I'll proceed with the purely functional aspects. The point of this article is to simply answer the question, how do you buy stocks, afterall. But I still want to point out that you absolutely must do your due diligence before you invest real money. Don't just throw cash into the wind.

Executing A Buy Order With A Market Order or a Limit Order

Now you'll need to collect the following information: the stock's ticker symbol, where the stock is traded (NYSE or NASDAQ?), the volume you wish to buy and the expiration of your order. The expiration indicates when you want your order to expire should it not be fulfilled right away.

You'll also select either a market order, where you ask that the order be executed immediately at current market price, or a limit order, where you ask that the order be executed when the stock is in a specific price range. If it doesn't reach the defined price range before your expiration, no transaction is executed.

After you've made these decisions and collected this data, you then execute an order or put in a "bid" with your broker. With online discount brokers, this will be a matter of clicking a few buttons. With some full service brokers, you'll send the order to your broker who will then execute the order for you.

There's a tiny bit more to it than that, but the terminology varies depending on the broker you've selected, so it's best to verify the last details through your individual broker.

The Most Important Answer to How Do You Buy Stocks Online

To be honest, I worry a little when I read questions like "How Do You Buy Stocks Online?" I worry because the person asking this question is clearly very new to investing online. There's nothing wrong with that, but please, please be careful. These are shark-infested waters.

Whether you're investing in blue chip stocks or penny stocks, you'll find people online trying to exploit you. Treat stock investing like a real profession. Be thorough and thoughtful in your research and never act on impulse. Be poised and disciplined. Develop a rigorous system and stick to it.

Don't skimp on transaction commissions when you first get started. Let a full-service broker help you learn the ropes. When you really know what you're doing, you can graduate to cheaper transactions through a discount broker.

Looking at penny stocks is a great way to make some serious cash in the stock market. People always say to stay away from penny stocks and that they are just to dangerous. I believe that there is a huge potential for making money with them. All you have to do is look at them in the right way. I am going to go over some different methods I use to watch penny stocks. They have really benefited me and they will benefit you as well!

The first thing I do when looking at penny stocks is try to identify a trend. A trend is a pattern in the history of a stock price. You might notice that a stock price shoots up around 30% every 2 or three months. This gives you insight on when the best time to buy that stock is. The great thing about these stocks is that there trends are normally in very short time intervals. So if you find one, you can use it over and over to make a profit!

One thing you have to watch out for is big events in a company's business. For example, if you see a nice trend that you could profit off of, but then you notice that at both of these points the company had a major deal. Then you should avoid that stock. You want your trends to come from normal business. Those trends will always be more reliable.

Penny stocks are not a risky as many say. Sure, if you are not careful, you could lose a bundle. You have to realize that that is true for every investing situation

Penny stock software packages are useful aids for people involve in trading this type of stocks. Software programs have become necessary tools for market traders and investors in these high tech times, and small-priced stocks are no different.

Penny stocks are those that trade for less than $5 a share and can be acquired over the counter through quotation services like the Over the Counter Board and Pink Sheets operated by Pink OTC Markets. They are stocks trading outside the major exchanges like NASDAQ and AMEX. The United States Securities and Exchange Commission has its own definition of penny stocks - that of low-priced, speculative stocks of a small company regardless of market capitalization. The SEC determines whether a security is a penny stockbased on price and not on market capitalization or where it is listed.

Penny stock trading has been deemed risky by a lot of market analysts and has been reported to be a magnet for fraud. The risk is exacerbated by the fact that it is very difficult to get information on most of the companies trading at penny stock markets. The SEC has warned investors against companies that promote their stocks on the Internet to lure investors to purchase their stocks. When unwitting buyers make the purchase and the price of the stock goes up, fraudsters will then sell their shares and the price will fall, leaving investors with a bunch of worthless stocks in their hands.

Software programs for penny traders are said to help investors by providing them with information about stocks with best reward potentials. They also teach investors how to place their orders and how to evaluate the mood of the stock market. These products are also said to provide information about companies with penny stocks, including how their stocks are doing.

There are a number of proprietary and free software products for penny trading available to the interested investor. Some online resources offer subscription services on penny stocks for a certain amount of fee. These services share the information that they get from software programs in exchange for a certain amount. If an investor prefers to purchase his or her own software, the products can range between $70 and over $1,000 depending on the features. One of the more popular software packages available in the market is Penny Gold software.

Penny stock software products might be able to help those who plan to trade in the penny stock market. However, these tools can only do so much and cannot completely protect users from potential fraudulent activities within the market.

Typically when you think of trading stocks, the major stock exchanges may come to mind like the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ), and the American Stock Exchange (AMEX). A Penny stock is a low priced security for a very small company with a market capitalization of under $500 million and usually trade in very low volumes. Penny stocks also trade on other "other the counter" exchanges like the OTCBB and Pink Sheets.

Due to the low trading volumes, penny stocks are an investment option that comes with a sizeable amount of risk. According the Securities and Exchange Commission, potential investors in penny stocks should be aware of the fact that due to the low trading volume of these stocks, it is possible that an investor won't find a buyer for their shares. Finding accurate price quotations are also difficult making it a strong possibility that an investor can lose their entire investment.

Penny stocks do carry a certain appeal for many different kinds of investors. Chances are though, a new investor looking for a potentially lucrative investments with a fairly low entry price will run across the penny stock. The allure comes in the fact that at such low prices any changes are often measurable in hundreds of percent in a given day or two. An investor's stock value can literally become worth double or even triple the original investment amount.

Conversely, the price of a penny stock can drop in value just as quickly. New and inexperienced investors would do well to avoid making penny stocks a major part of their investment portfolio. Also due to the low listing requirements on exchanges like OCTBB and Pink Sheets, many companies are not to be considered safe investments. Many of the companies listed on alternative exchanges lack enough financial history to be able to accurately determine if they would make a good investment or not. In some cases, companies that are considered to be penny stocks are either new companies or are in some cases dangerously close to bankruptcy.

Unfortunately, some traders have even taken to artificially manipulating stock prices by buying up large amounts of a stock and then convincing individual investors of the need to buy. Since most of these stocks aren't in such great demand, an investor will have to lower his asking price in order to entice a bidder, oftentimes at a loss.

Not every company that trades for "pennies" should be considered fraudulent. Some are simply small companies trying to grow their business and are working very hard to end up on the larger market exchanges. Wading through the fraudulent companies to find the truly reputable companies capable of helping an investor turn a large profit may not be worth it. Investors with low investment income may be convinced that just one good trade can triple their investment, but in the end an investor is better off choosing an investment from a company that they have researched and are convinced that this company's value will grow in the future.