Reading Penny Stock Market Data

You can greatly improve your chances of making money from penny stocks by learning to read stock market data. The stock market gets input from a lot of sources. Understanding the different factors that influence the market, the companies and their stock prices is an invaluable skill for every microcap stock trader.

 

Listen to current economic trends to know which area of the economy is or will experience growth. Watch the direction of government spending and even foreign investment. Now compare the information you have with current performance of stocks in the market. You will notice a relationship between this information and the industries that are up and those that are down. Good stock traders profit from keen observation of factors that influence the market.

 

Start with a small list of about ten stocks to study and analyze until you become better. You can get a list from, msn, yahoo or Google finance. Research these companies in-depth. Watch out for the companies that are looking stronger than others in their sectors. Check out earnings per share ratio. Read the company’s financials; annual or quarterly reports. Check the trading volume. Trading volume is an indication of how liquid a stock is. The higher the volume, the easier it will be to sell after you buy.

 

There are different types of penny stock charts. All you need is to know the subject of the chart to have a basic understanding of it. Some charts measure daily moving average of a penny stock whiles others just show the price. Watch out for the following:

  • The support level is the lowest price of the stock at different intervals over a given period.
  • The resistance level is the highest price the stock maintains even when demand is high.

 

These two make up the penny stocks trading range in the period of time. A stock with a high volume of trade rarely falls below the support level and is a good penny stock to buy. Trend lines on the charts can also show you future price movement of the stock.

 

For more details you can consult with the experts at Paradigm Capital Management. With a long history of small cap investing and micro cap funds, Paradigm Capital Management employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact.

 

Our three decades of experience provide an exceptional level of insight that is reflected in our high-conviction portfolios.

Call us 212.364.1830

 

Read also: Penny Stocks to Leverage Your Investment Portfolio

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Diversification in Penny Stock Trading

Many people want to participate in the stock market but simply cannot accumulate enough capital to participate. Purchasing cheap stocks can be a reasonable alternative for people without a lot of money who want to be involved in the stock market. While individuals with large brokerage accounts do not have difficulty in day trading stocks, many individuals who would like to invest in the market simply do not have those financial resources.

 

Blue chip companies, those whose names you recognize that make up the top companies whose success and failure we are all accustomed to watching on stock market reports, can require you to have thousands of dollars to buy merely one hundred shares.

 

And waiting for those one hundred shares to earn significant profit can take a long time. Passive investments, those outside the market that pay you interest, for instance, can take even longer to earn you a decent return. Small cap stocks take much less money to purchase and because of their lower price can double their value with jumps in price that would barely register for a larger company.

 

Penny stocks require a much smaller capital investment than larger companies, often referred to as mid cap and large cap stocks. The low price of these kind of investments, allows investors to buy more than one share. Buying more than one stock is a concept that experts encourage so that if a single share loses money, you have other investments that are not losing money, or are perhaps even making you money.

 

This is the concept of diversification. One of the challenges facing penny stock purchasers is finding advice about day trading such stocks. Typically, stock advisers focus on mid cap or large cap stocks that represent larger companies. The internet offers many day trading stock pick websites but few if any pay attention to the opportunities offered in day trading penny stocks. Many stock experts criticize penny stocks, but some great companies started out as penny stocks.

 

If you want to learn more, then consult with the experts at Paradigm Capital Management. Paradigm Management is a trusted leader in small cap investing and invests in value stocks of companies across all capitalizations

 

Contact at (518) 431-3500 or visit http://www.paradigmcapital.com/

How To Do Stock Screening Right?

The process of stock screening can be broken down into clear and efficient steps that lead you to new trading and investing opportunities quickly. Here’s how it works:

 

First, you need to capture all the relevant data in the stock screening software. If you’re a fundamental guy obviously you’re going to need the last 5 years of annual financial statements, plus the most recent quarterlies. If you’re a price-oriented trader, you are probably interested in price patterns, candlesticks, or technical indicator studies on a shorter term data population. So you need to pick the data set on which the filter rule will be applied.

 

Second, you need to devise the filtering rules you want to use in your stock screening tool. If you’re a fundamental investor, your rule might look something like this: Tell me all stocks on the Toronto Exchange which have market cap less than 100 million, debt-to-equity ratio less than 2, and average quarterly cash flow growth rate over the last 3 quarters of at least 10%. This screen will select small cap stocks with low leverage and increasing cash flows — a good indicator of financial health. If you’re a technical trader, your rule might be: Tell me all stocks on the Toronto Exchange with closing price less than 50 and greater than 5, which have RSI greater than 50, a rising 50 period moving average, and a 3 day pullback in price. This screen will select all stocks that are in an uptrend, with relatively strong internal strength, but which have had a short term pullback that might be a buying opportunity.

 

Third, you need to be able to drill down and further analyze the stocks that the stock screening application discovered among the entire universe of stocks. As a fundamental investor, you want immediate access to the other financial data for each stock selected by the screen. As a technical trader you want to see the price and volume on a time series chart, with perhaps several additional indicator overlays.

 

Once you’ve done your further drill down and analysis, you can select stocks to trade or invest in. This process should be constantly done to ensure you are always considering the best available opportunities that match your method or strategy. In a nutshell, this is how you do stock screening correctly.

 

For more information you can consult with our experts at Paradigm Capital Management. Paradigm Capital Management employs a disciplined, bottom-up approach when it comes to small cap investing and micro cap funds, with an emphasis on fundamental analysis and extensive management contact.

 

We have the expertise when it comes to small cap investment to achieve your financial goal, contact us at (518) 431-3500
OR visit us here: http://paradigmcapital.com/

Wicked Schemes To Avoid When Investing In Penny Stocks

Any time there is the potential to make a lot of money, you can bet there is also going to be scam artists trying to scam people. Trading penny stocks can yield very substantial profits over a very short amount of time. However, you have to be careful how you go about it because penny stocks are much more vulnerable to scams since they are not closely regulated by the SEC (Securities Exchange Commission – the federal agency that regulates stocks) and the price is much easier to manipulate than other stocks.

 

Here are the most common penny stock scams:

 

Penny Stock Scam Spam

This is a common variation of the “pump and dump” scheme. Scammers buy up a bunch of stock, usually in a thinly traded company where there is very little information available publicly, and then they hype it (“pump” it) through unsolicited email to people whose email they get from buying a list(s). This hype generates a flurry of trading which quickly raises the price and then they sell it at a significant profit (“dump” it) – believe it or not, they get about a 6% return response! Never EVER buy a stock based on an unsolicited email. It is most assuredly a scam – no matter how cleverly worded.

 

People Pretending To Provide Insider Tips In a Forum

Be really careful with this one. Sometimes this is done by a scammer in a classic “pump and dump” but there are also well-paid consultants hired by companies to hype their stock on forums. They are professionals and they KNOW what they’re doing. They know how to make a story sound believable with fake press releases, etc. They also understand that subtle “slips” (pretending to be accidental) on a forum can be more effective than blatantly promoting a stock.

 

The Short and Distort Scheme

Here’s another fairly common “pump and dump variation. A fraudster first sells short many shares of a stock. Then instead of hyping it, he bad mouths it to get people to dump it in droves and artificially drive the price down so he can make a bundle.

 

Mis-dialed Messages – Wrong Numbers Leaving a “Hot Tip”

The SEC says this is the latest “pump and dump” scheme. This is where you get a message from someone you don’t know leaving a hot stock tip for a friend – they make it sound like they accidentally mis-dialed and accidentally left you the message – BUT it is NO ACCIDENT. Beware of any information you receive in this manner – and there will probably be another variation of this “accident” tomorrow.

 

Free Penny Stock Picks

Anyone who is really good at picking penny stocks isn’t going to give you their best picks – or even good picks – for free. Picking penny stocks is a highly specialized skill that few people can do and it takes a lot of time. Finding a really good penny stock picker is like finding a rare diamond – and they aren’t going to give this information away for free. Free picks are very often “pump and dump” schemes. Beware of any thing “free” in the penny stock world. It could very easily end up costing you most of your investment.

 

Now, Here’s Easiest Way To Make Substantial Profits With Penny Stocks

Find a penny stock picker with an uncanny ability to pick penny stocks. Have them send you their picks with no delay and then follow what they do precisely. This type of service will not be free but if you pick the right service you will easily make your money back many times over.

 

If you want to learn more, then consult with the experts at Paradigm Capital Management. Paradigm Management is a trusted leader in small cap investing and invests in value stocks of companies across all capitalization

Contact at (518) 431-3500 or visit http://www.paradigmcapital.com/

Day-Trading Rules to Trade in Micro Cap Penny Stocks Companies

Micro Cap stock investing is an immediate catching trend in America and in many parts associated with Europe. Along with a small cash investment opportunity as well as a high degree of return on investment, Micro Cap stock companies already have develop into the hot choice pertaining to modern day investors. Micro Cap Penny Stock investment companies provide higher volatility. consequently as a penny stock investor, it is critical that an individual stick to certain golden rules. Here are a few critical guidelines you can stick to while investing in Micro Cap Penny stock companies.

 

Day Trading: Intraday investing of the Micro Cap penny stock is thought to be as the most secure process associated with investment in Micro Cap stock companies. You are recommended to book profits on the day of placing orders. This reduces any opportunity of booking losses on the carry forward orders due to the particular factors that may well be beyond your control.

 

Management Investigation: This is actually yet again extremely important. You will need to perform a comprehensive analysis of the administration of the particular company. This helps an individual fully grasp the foundation associated with the particular Small Cap stock company you are generally inclined to invest in. The balance sheet, along with cash flow statements involving these kinds of Micro Cap stock companies may not appear as good as some of the large cap stocks, nevertheless they have value to offer you by means of reasonable management together with knowledge who can easily guide them to the future level.

 

The Exit Strategy: As a Micro Cap penny stock investor, this is a golden guideline you should keep in mind. Continually know your bail out method prior to you actually enter into a new penny stock company. Also, know when to take profits or even cut your losses prior to you getting into the position. This is usually a very difficult psychological commitment to make.

 

Be Volume Sensitive: Be mindful of the particular number of shares exchanging hands every day. This can significantly affect whether or not you can actually acquire or sell shares. Generating large volume will certainly assist an individual enter as well as get out of your current positions a lot more effortlessly. Look for big volumes on multiple trading days, as a single day of hefty trading can be the particular outcome of a large buyer/seller.

 

The Pump Machine: Build up always plays a purpose, often misguiding an investor in just about any market. Same is the situation with penny stock trading. Anyone should certainly always maintain a check on the particular viability connected with the newsletters issued by different penny stock companies before you choose to invest. The parameters associated with your decision-making is going to change based upon on whether you are usually day trading as well as long term.

 

Learn about how to trade penny stocks, consult with the experts at Paradigm Capital Management in this regard. Our three decades of experience provide an exceptional level of insight that is reflected in our high-conviction portfolios.

Call us 212.364.1830

The Importance of Knowing a Company’s Market Cap Before Investing in It

An investor will measure a company’s performance based on its sales, but he should be aware of its size in terms of the market value. By knowing the market capitalization of a company he can diversify his stock portfolio among different asset classes. Because market cap not only measures the company’s value in the open market, but also give insight into its future performance. So market cap plays a major role in deciding the future and prospects of a company.

 

We can calculate market capitalization by multiplying the per share price of a company with its total number of outstanding shares. This number will give you the total value of the company, or help us to know how much it cost to buy the company in the open market. Most of the investors use market cap to compare the performance of similar sized companies or companies dealing with the same business before making an investment decision. If the per share price of a company is $50 and its total outstanding shares is 100 million, then its market cap will be $5 billion. And when a similar sized company’s per each share cost is $10 and its total outstanding shares is 400 million, and then its market cap will be $4 billion. If we evaluate these two companies, the second company’s market capitalization is higher than the first one and this gives the investor a clear picture about the company’s growth rate, risk, dividends and international exposure. So there can be companies with lower sales but tremendous growth opportunities. Such type of companies will have large market caps and they will become one of the investors’ favorite.

 

Based on the market capitalization companies are categorized into three types. They are small cap, medium cap and large cap.

 

Small cap companies – The companies belonging to this category will usually have a market cap between $150 million to $1 billion. Belonging to small cap category, these companies per share price will be small or total outstanding shares will be relatively small. So they are considered as relative less risky stocks. Some analysts often consider these stocks as good investments due to their low valuation and possibility to grow to a mid cap or large cap stock. If we invest wisely in such type of stocks, which is by making a technical and micro analysis about the company, then we can anticipate good returns. If you can track the hidden gems in the small cap space then it’s a good idea to invest in such stocks, as nothing else can appeal you more.

 

Mid cap companies – The companies that have market capitalization in the range of $1 billion to $10 billion will come under the mid cap category. These companies are considered to have achieved a relative stability in the market and they got ample growth opportunities to come under the large cap category.

 

Large cap stocks – The companies that belong to large cap will have market capitalization above $10 billion. The big boys that come under this category are considered as the safest companies with regular dividend payouts. This category includes many blue-chip companies, oil giants, telecom companies and consumer product kingpins. In the U.S, some companies like AT&T, Johnson & Johnson, P&G and Wal-Mart are perpetual favorites among many investors. If you are ready to play without fear, then increase your stock portfolio with large cap stocks and enjoy great returns.

 

As a good investor, we should always update our information about the companies in which we are planning to invest or already invested. To gather news we always depend on daily newspapers, other than home television and internet. To become a smart and intelligent investor, one should assess the market capitalization of the companies he is going to invest; though understanding the present market conditions is also a key factor in deciding a company’s performance.

 

Read also: Become an Insider and Reduce Risk in Penny Stock Trading

Reasons To Own Small Cap Value

If you want to earn the best returns on your stock portfolio, you need to own small capitalization (less than 2 billion), value oriented stocks. Here are the reasons by our experts at Paradigm Capital Management:

 

1) They Outperform Every Other Class of Stock. Period.

 

Ibbotson Associates analyzed data from 1926 to 1997 and concluded that small cap value stocks outperformed the general market by 4.3% annually – more than any other class of stocks. Vanguard published data that showed, from 1927-2004, small cap value outperformed large cap value, blended, and growth portfolios. A Fama and French study shows this class outperforms all others in recessionary periods as well. Another study by Fund Evaluation Group shows that small cap value has outperformed every other group, and by a wide margin.

If we want the best returns for our portfolios, we have to invest in the best performing class of stocks.

 

2) The Market’s Valuation of Small Cap Stocks Is Inefficient

 

Stock analysts overwhelmingly cover large, well known companies. Their clients prefer to be in stocks of companies they know, and the investment firms they work for are forced to purchase large cap stocks so as not to exceed statutes by owning too much of a firm. When funds are operating with billions of dollars of assets, it doesn’t make sense to invest in small companies – any investment returns from these will not materially affect the fund’s performance because the position is too small.

 

One of the best books ever written on investing, Peter Lynch’s One Up On Wall Street, explains this phenomena well. Lynch earned stellar returns running Fidelity’s Magellan fund by buying hundreds upon hundreds of small positions in promising small cap stocks and holding them until the market realized their value.

 

Small cap stocks are valued inefficiently because of the lack of research on them, leading to misunderstanding of a company’s business or prospects. Add to this the general investment community’s unwillingness to invest in small caps, and you have a perfectly inefficient market for them, leading to bargains.

If we want the best returns for our portfolios, we have to take advantage of inefficiencies in the system.

 

3) Small Caps Can Become Big Caps

 

This one is obvious – you’re not going to find the next Microsoft or Wal-Mart by investing in Microsoft and Wal-Mart. When Microsoft started trading on the NASDAQ in 1986, it’s market capitalization was about 700 million. Today, it’s worth 260 billion – giving you back your initial investment 370 times over (and that’s not including dividends!).

 

Relating to point #2, once small cap stocks grow to a certain size, institutions and mutual funds can safely invest in them without worrying about statutory regulations or problems of scale. This leads to an influx of institutional money, sending stock prices up even farther. As market cap grows, these stocks get added to various indexes, which leads to investment by index funds that track them.

 

Small caps by their very nature have more and larger avenues of growth than large capitalization stocks. This, plus the intricacies of the financial markets, give them several advantageous characteristics for share price appreciation.

 

If we want the best returns for our portfolios, we need to own the best opportunities for revenue and earnings growth.

 

4) Small Caps Are Attractive Buyout Bait

 

Large companies are always struggling to deliver growth to their shareholders. Adding meaningful growth to a company with billions of dollars in revenues and earnings is not easily done. These large companies are often bureaucratic nightmares, slow to adapt with new trends and not nimble enough to stay ahead of changing markets.

 

Instead of taking the time, patience, and effort to develop new businesses, these cash rich mega-corporations often turn to acquisition as a quick fix for growth. Also, private equity groups will often buy these companies to restructure and then take them public again, reaping a big windfall. Buying small companies, even at a significant premium to market price, is often a drop in the bucket that delivers new opportunities in an instant.

 

5) Warren Buffett Says So

 

No less an authority than Warren Buffett himself has guaranteed that he could earn 50% annual returns investing sums of around 1 million. How would he do this?

 

“…look for small securities in your area of competence where you can understand the business”

 

If we want the best returns for our portfolios, we’d be wise to listen to the world’s greatest investor!

 

If you need any help then consult with the experts at Paradigm Capital Management – a trusted small cap investing company. We at Paradigm Capital 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/

Why Do the Best Penny Stocks Initiate Buy Back Programs?

The most direct act that a company can do to increase the price of its stock is to buy up its own shares in the open market. The best penny stock companies often launch buyback programs when they seek to diminish the number of shares outstanding (the number of shares available in the market). The share bought in the open market can be retired. Retired shares are no longer counted as outstanding. Investors will value the remaining shares at a higher price.

 

As an example: ABC Company has a $5 million market cap that has 10 million shares outstanding. This would give ABC a price per share of.50. With a corporate buy back of shares the outstanding number of shares would be reduced. Supposing ABC retired 2 million shares… that would leave 7 million shares outstanding. If the market cap remains at $5 million, it has no reason to go down since investors still have the same valuation for the company. Then each share would now be worth.71, which is.21 more than they were worth prior to the buy back.

 

There are a few reasons for instituting a buy back. The first reason is if the company wants to shore up confidence in the company. Company management wants to show investors that they have confidence in their business plan and stock… and continue to believe it is a solid long-term investment. It one thing for company insiders to announce news such as expected new earnings… and it is another thing for them to put their money where their mouth is.

 

The second reason a company may institute a buy back is to push up the price of a stock. The company knows that investors will translate the buying of a stock as a positive sign on the value of the stock. However, this can be done at investor’s expense. A company stock with no trading volume might start buying up the stock to push the price of its own stock up. However, this kind of activity is monitored by regulators, but investors still need to be careful.

 

In conclusion, make sure you conduct complete due diligence when you see a company initiate a buy back of its own stock. However, this can be a very good sign for a small company on the move.

 

Paradigm Capital Management is a small cap company. With a long history of small cap investing and micro cap funds, Paradigm Capital Management employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact.

Our three decades of experience provide an exceptional level of insight that is reflected in our high-conviction portfolios.

Call us at 212.364.1830

Purchasing Penny Stocks through An Online Broker

Penny stocks are one of the hottest securities around and for good reasons, too. These are very affordable stocks that can be bought for under $5 per share with many going as low as a fraction of a dollar. The profit potential is also good if and when the trade has been done with careful research, analysis and evaluation from the buying to the selling steps, which is also true for the blue-chip stocks anyway.

 

Add in the fact that microcap shares can also be traded through an online brokerage site and traders have the opportunity to earn a good income from the comforts of their own home. But small cap shares also being one of the riskiest commodities in the market, we must emphasize the need to be very careful in making decisions lest your capital makes a beeline for the netherworld.

 

The Right Information

 

The first step in a wealth accumulation activity like stock trading is to gather relevant, reliable and timely information about the micro cap stocks under consideration. Unlike in previous years, it is now easier to secure information about penny stocks in the Pink Sheets and the OTC Bulletin Board because of the stricter reporting requirements and classification system in place. But if you want more reliable information than these two over-the-counter trade venues can provide, we suggest heading to the Nasdaq and AMEX small cap markets.

 

Gathering of information also involves careful research into the profit possibilities of the penny shares. Just like in blue-chip stocks, fundamental and technical analysis as well as qualitative and quantitative evaluation is essential in weeding out the losers from the winners with the company management, economic direction and even technological innovations as part of the criteria. Of course, the financial statements must also be scrutinized for analysis.

 

Open An Online Brokerage Account

 

While you are performing analysis of the penny shares, you can also enroll in an online brokerage site. Depending on the terms and conditions of the site, you may start a trading account with an amount from $500 to $5,000 as well as maintain certain amounts in the account. The commission rates and types of services also vary with many online sites now offering discounts for stock transactions.

 

Then, you will purchase the penny shares that you have deemed the most promising in terms of profit potential. The online broker will execute the trade for you based on pre-agreed terms including the ticker symbol of the penny stocks, the number of shares at a certain price, and the hold period, to name a few criteria. These tips will help in successful purchase with the view of making a profit later on:

 

  • Invest risk money into the account. Never gamble with your retirement, pension, educational and living expenses funds since you can ill afford to lose even a single cent of it to high-risk investments like penny stocks.
  • Invest small amounts at first just to get your feet wet. It is also important to diversify your penny stock investment as well as to ensure that microcap shares form only a small part, say, just 10% of the total investment portfolio.
  • Stick to a limit order of penny stocks. This lessens the risk in times of big price changes.

 

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/

Importance of Penny Stocks in a Portfolio

Many people have diversified their portfolios in ways that ordinary people can’t even imagine. But the one thing that many people don’t do is combine the right percentage of penny stocks into their portfolios. Penny stocks should compile no more than 2.5% or your portfolio.

 

The reasons why penny stocks are important in your portfolio are because they give you the right balance between high risk stocks and low risk. All stocks are risky in some way, but many people dislike penny stocks because they are usually companies that are in turmoil or are newer to the market. But the most important thing about penny stocks is that they give you a great balance between fast income and growth. You never know when you might hit that diamond in the ruff and find a company like Google, Yahoo, or Microsoft. Just imagine if you were to pick out 1 winner in ever 5. If that 1 was like Microsoft then you just won. But the facts are that if you do your research rights the likelihood of you picking out a good stock are 1 in 2. Those are great odds.

 

What have you invested in lately? Are any of the shares that you bought ready to sell yet? And if so are they going to sell for a profit? Look at this example; if you bought 100 shares of TTT for $10 and then you bought another 100 shares of HHH for $3. You just spent $1300 on stocks, but what has the better chance of getting your money back fast? The truth is they both could get your money back and profit just the same, but the penny stock has a lot less points to increase in order to reach that goal.

 

For more information you can consult with our experts at Paradigm Capital Management. Paradigm Capital Management employs a disciplined, bottom-up approach when it comes to small cap investing and micro cap funds, with an emphasis on fundamental analysis and extensive management contact.

 

We have the expertise when it comes to small cap investment to achieve your financial goal, contact us at (518) 431-3500

OR visit us here: http://paradigmcapital.com/