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Nothing could be as remunerative than to trade in penny stocks over the counter or OTC for short. To get started with they are priced ridiculously very low costing just few cents or pennies each. In fact such micro stocks that are swapped over the counter may never exceed $5 as per the rigorous SEC guidelines, if it is at all to qualify as penny stocks. Because they are priced exceedingly low, investors who look forward to make huge fortune by merchandising in stocks, buy penny stocks in huge volumes hoping to trade them for big profits at the right opportune. So for the same price at which you may be competent to buy one or two stocks of a high priced blue chip stock you may buy rather a huge number of these penny stocks of two or more little companies. Over and above one may even suppose to see the price doubling up in a day or two, which is plainly not possible for mid cap or huge cap stocks swopped on national stock exchanges such as the NYSE, NASDAQ or AMEX. Undoubtedly any person wanting to build a huge fortune say by earning millions in a year or two may only hope to do so by staking their cash in penny stocks of respective little companies having a capital thats less than $200 million. Why Penny Stocks are both Risky as well as Lucrative for Trading Moreover a slight swing in the positive direction may raise the value of OTC stocks also called micro stocks few hundred times more in a day or two, which is plainly unthinkable for huge cap stocks.This happens because of their high volatility in their value that may climb either very high or very low than what it is priced currently. Its because of this outstanding volatile nature that what provides the requisite instinctive to penny stock pricing as merchandising progresses by the hour. Such volatility may be so unpredictable a lot of a time that it even becomes difficult for a highly seasoned merchant to comprehend in which direction would the price genuinely follow. Its very much like the wind that may be a breeze or of a sudden blow up into a storm at times or there could be total lull with no motion at all. The same is true for penny stocks too. There could be times when there is no merchandising at all and the penny stock has no takers for months if not years though when you brought them at a outstanding price, there was tremendous interest and instinctive in retail at that time. This alone makes merchandising in penny stocks so highrisk from an investment point of view. In fact penny stocks follow no scientific principles that would help you to guess it is value at galore point of time, like you might do so regarding the position of stars or comets in the heavens. However as I have already brought up if things work out in your favor then perhaps you have a better probability to win and make a fortune as you may do so while playing pokers or possibly slot machines. As share of your planning procedure you may choose your own best system to suit your temperament and the constraints of fixed resources available at your disposal. What you may adopt best is a defensive tactics to minimize losses. To do so you have to find stocks of those companies that are in business which has significant demand in the market as well as have a outstanding future for growth and expansion. The spheres are perchance those of Bio stocks, energy stocks or something niche which has immense potential that you may foresee. You have to scout such undervalued stocks that has been missed out by others and invest in them so that you may cash them when things are ripe. What all Winning Strategy to Apply for Trading in OTC Penny Stocks Now as per stats 95% of investments fail hence it is always best to disseminate your risks by diversifying as much as you may when retail in penny stocks of respective OTC companies. Even if 95% of your portfolio fail and fall badly at least the rest may climb so high in value that it may pay you back assorted hundred times the value of your total investments. Once you recover the primary amount invested you may then play with house cash i.e. with the surplus that you gained in returns. That is how it is not surprising to find numerous success stories where investors who dipped their toes into the stock market by investing just $200 in respective penny stocks were capable to make hundreds of thousand dollars in a year. This is what makes retail in OTC and pink sheet stocks so remunerative even though penny stocks are hazardous because of their outstanding volatility. But that is only one approach to a problem we have discussed.On the contrary there is no single full proof system for water tight solutions, in fact each single solution gives rise to yet another set of difficultnesses that has to be solved. Since it is not possible to predict what all difficultnesses might crop up at long last for the duration of marketing it is best to stick to patterns. The more syndication patterns you recognize from past history or experience, the better would it be for an investor. By analyzing each of these patterns you might at least recognize how a penny stock would behave provided all constituents presently in tussle in the market remains as it is in the next few days without drastic change in “weather” patterns. Importance of Fundamental and Technical Analysis So to make your own analysis before taking any decision to invest, it is necessary that you learn all regarding Fundamental and Technical analysis. Its very much like making your choice of a pachyderm or a horse for investment. If you have to buy an elephant you have to learn all regarding elephants, their eating habits, their work culture, what all kinds of work it may be fruitfully employed, how much return it would give for the duration of it is working life span after deducting the fixed costs for it is upkeep such as feed and health, salary to be paid to a trained mahout (the man who drives the elephant sitting atop), debts to be repaid back etc. How some babies would it be capable to develop for the duration of it is procreative period, which could be further nurtured and trained for future growth and elaboration of say lumber jack business, how much of the tusks would fetch as ivory cost etc. How much suitable is the timber business where the elephant would be employed, if it would stay stable since timber costs are unpredictable and a good deal of environs conscious countries like India is switching over to non-wood materials or importing them from Malaysia or Indonesia as wood is cheaper. Similarly if you buy horse, you have to grasp what aim is the horse is being purchased, since the horse that may be used in a traditionalisti Indian wedding may not be suitable for a race horse. The pedigree and type of horse fit to win races etc. My idea on elephants as an example came after I just finished looking at a TV Animal Planet program on “swimming elephants” of Andaman and Nicobar Islands in the Bay of Bengal in India. So you have to find out for each stock what all are the Revenues and Earning, how competent it is vis a vis other companies in the same sector, the extent of it is debt load, the current and future demand for such industry in both domestic and global market, joint ventures or cooperative relationship with other companies in similar fields, financial ratios (such as Return on Assets, Debt to Equity, Profit Margin, Return on Equity, Current Ratio etc.), market risks, press reviews and public relations, core management competitiveness and integrity, insider trading, buy back plans, institutional holdings and if it is involved in any severe legal tangles, political policy and influence etc. Other than competent to understanding the health of a penny stock company, it is indispensable that you make a technical analysis of the respective chart patterns to perceive the rise and fall in demand that has a strong influence over the price of any stock. For this you have to learn the dissimilar chart patterns and how best you may make a technical analysis of any penny stock so that you recognise what to do when the price rises and then dips to bottom out say in a cup and handle pattern, or when it breaks through resistance or a aid point. How you may select your entry and exit points, setting up of stop losses, limiting losses etc. Hedging as a Strategy to Protect your Investment There is another way by way of which you may protect your investments which is by choosing hedge funds that supplement each other, say you buy shares of oil and gas companies as well as those for transport companies. If the price of oil rises then it would be profitable for oil companies but not those of the transport companies, or when the oil prices goes down the transport companies would be bettering their revenues. So which other way your investment remains protected. So consequently choose your stocks very cautiously for your portfolio, such that even if 3 of the 5 companies fail to deliver, you may cover up your cost from the gains made by the other two. The Importance of Subscribing to Reliable Information and Newsletters Now as a newcomer it is rather easy to be overwhelmed with such a huge number of stocks in the market particularly OTC penny stocks. To help you in your crusade you would require professional help and use of software to support you with your elaborated analysis of each of the penny stocks you target. For this you will need the service of newssheets since data on OTC stocks are by and big sketchy and you need authentic insider information. Unlike stocks listed in national stock exchanges where details of each of the listed companies are effortlessly available the same is not true for micro stock companies. Hence you have to subscribe to authentic newssheets to keep yourself up to date. 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