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How To Use Penny Stock Prophet To Make More Money – Part 2 of 3

How to use Penny Stock Prophet Part II – Introduction

Most people don’t understand penny stocks.  As a result, many people who I believe could profit dramatically by buying penny stocks miss what could be the investing opportunity of their lifetimes.

So, what I want to do here  is to give you a better understanding of penny stocks and how to use Penny Stock Prophet supplied information to make more money.  Whether you decide to buy penny stock or not is your decision and I’m going to present what I see as the facts about penny stocks.

I’ve been watching and buying penny stocks for quite some time now and I’ve noticed that there are some significant differences between penny stocks and “regular” small and large cap stocks… So, let’s start there.

In Part III of this Article Series,  I’ll explain how I believe that you can trade them with Penny Stock Prophet supplied leads and information to make more money.  And, here comes the disclaimer… Penny stocks, like all investments, carry significant risk of substantial or total loss of your investment… like most people don’t know that already.  No one can guarantee the results that you will achieve by trading penny stocks.

What they don’t say in that darn the disclaimer is that they also have the potential to make YOU A Whole  LOT of Money, if you go about it properly!

In Part I of this series, I covered what I think are the differences between penny/micro cap stocks and small/large cap stocks from the small investor/trader’s point of view.  Here is a refresher about the 3 things that I covered:

1) Capitalization …  I talked about what I think actually matters to small investors/traders  in the capitalization area.

2) …  simply too many of these smaller companies for the governmental agencies to regulate them properly.  As a result, there are con-artists and flim-flam promoters who will cheat,lie and mislead…

3) The trading characteristics of penny stocks are “different” than larger, more highly capitalized and higher priced stocks.

Now, I’m going to talk about why I think that the Penny Stocks get a bad rap… I’m going to  talk about the differences between the popular notions about penny stocks and their reality.

Now without further ado, here’s Part II…

My Thoughts About The Differences

The little “Bio” about me in the right hand column fails to give the full spectrum of my work experience.

For the past 35 years or so (I’m actually a few years older than my picture would lead you to believe… OK, so I’m vain), I have been various “flavors” of professional consultant.

And, one thing that I have learned about in all those years is to always explain the reason for the facts.

Frequently, the simple statement of the fact will put a highly negative impression about a subject… Don’t believe me?  Anyone ever hear of “spin” doctoring?  I think the technique may have been invented by a consultant, actually … probably in the Garden of Eden.

However, when full explained, you will frequently find that the subject in question is not negative but actually quite positive.  So, here are my thoughts on some of the points I presented above and how you can protect yourself if there is a “downside” to  the item:

1)      Capitalization – This of course is a “biggie.”  What you don’t see is that the management of many small companies (micro-caps) is actually “super-excellent.”  Frequently better than their larger counterparts in the same marketplace.  How do I know?  Simple deduction… Think about it… They are successfully surviving and, in MANY cases, excelling and actually thriving compared to their larger competitors.

And, just because they are small it doesn’t mean that they can’t get money.  It’s usually about the credit rating and how much they want, not the size.  When I was  the President of a small but growing, prosperous computer consulting firm I had no difficulty getting money from our bank…So, I know from personal experience how deceptive size can be.

You protect yourself by good research and careful reflection on what your research has discovered about the company.  It doesn’t take long but it must be thorough!

2)      Fraudulent operators and fly-by-night companies – There are hucksters and con-artists in every business… large or small.  In the first list that I make in Part I of this article and summarized above, I  mentioned a couple of notable examples of large cap  corporate fraud… Enron, AIG and Arthur Anderson to name 3 that just rolled off the top of my head.

It’s not just the micro-cap stocks that have the problem.  Here’s a link to Wikipedia that had a slightly larger list.

http://en.wikipedia.org/wiki/Accounting_scandals

Scroll down a screen or two to get to the table with the list of the major scandals since 1980.

Of course, the biggest protection that you have is research and your ability to say “NO!”

Hucksters and con-artists make their money by playing on your greed.  If their “Spiel” doesn’t jibe with the facts from your research.  Say “NO!,”  walk away and NEVER take their phone calls again!

If you take their phone calls or agree to meet them, they know that they have you and you are going lose your shirt, as they say.

Another protection… only invest/trade in longer lived  companies… If  a  company is less than 3 years old, walk away unless you are one of the founders and will sit on their board or be a corporate  officer with actual decision-making authority.

3)      Trading characteristics – I see these as highly profitable and not negative characteristics.  And, this is why I personally trade penny stocks.

Why?

Because…

The fact that they trade fast is a positive is a positive to me. I can make more money faster if  I get in and out when I should.  I’m a fairly experienced options trader so I actually like the speed.

However, along with the speed of the penny stock movement comes the need to get your timing right

I like penny stocks because not only do they trade in a fashion similar to options and commodities, but they do not expire like options or get delivered to your house like commodities if you screw up.

I actually knew one guy, years ago, his name was Bob (I don’t remember his last name), if memory serves me, that got a whole bunch of stuff delivered to his house… I don’t remember what it was but I do remember  that his wife was not pleased and he never  traded commodities again.

Next, is the final part of this series where I’ll try to explain why I’m positive that the Penny Stock Prophet is not a “Pump and Dump” operation, how Penny Stock Prophet can help you get the research and timing right and how I think that you can make more money than you ever have before by signing up for and using the Penny Stock Prophet alert service’s recommendations… especially if you are a beginner or only have a smaller amount of money to use for penny stock trading.

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