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BLUE-BLOODED
WALL STREET TYPES AND
I GUARANTEE YOU THIS:
THEYLL NEVER SHARE A HOT
TIP ON A PENNY STOCK
A STOCK TRADING FOR UNDER $5.
Why not? Well, consider the reasons from
these high-level investors
Mutual Fund Managers: Theyre prohibited from investing in stocks
with such tiny prices. So they dont even bother researching them.
Hedge Fund Managers: These high-flyers are simply too rich to own
penny stocks. With billions in capital to throw around, they cant buy and
sell penny stocks without radically influencing market prices.
Sell-Side Analysts: They shun penny stocks, too. Even if they wrote an
overhyped research report, theres just not enough investment banking
business available to make it worth their time.
Thats exactly why I recommend that you adhere to the following five
rules when investing in such a speculative corner of the market
RULE #3
Cut Your Losers Quickly: When it comes to penny stocks, buy and hope is not an
investment strategy. Were after fast gains. So dont expect to hold any penny stocks for more
than three to six months, unless prices are heading steadily higher. Either these companies
pay off quickly, or they dont. If its the latter, sell and move on to a better opportunity.
RULE #4
Use Limit Orders: Most penny stocks sport lower-than-average trading volumes. If we use
market orders, well end up paying more, which ultimately cuts into our profit potential.
Instead, use limit orders to buy penny stocks. And be patient. Penny stocks are notoriously
volatile, which means you should never have to chase prices. Eventually a dip in prices will
materialize.
RULE #5
Theres No Crying in Baseball: When investing in such a speculative area of the market,
youre bound to invest in a few duds from time to time. So expect it. As long as youre
keeping your purchases small and not investing more than you can afford to lose, theres
no reason to shed a tear.
In the end, if you follow these five rules, your winners should far outshine your losers making
hunting profits in penny stocks a worthwhile endeavor, indeed.
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