Investing money in penny stocks can be risky but if you choose good penny stocks then it can be profitable too….🌺
If you don’t know how to check if a penny stock is good or not then this post is for you because through this post, I am going to share 7 points through which you can easily know if a penny stock is good or not….
So, without further delay, let’s start this post….⤵️⤵️
1. Check The Daily Traded Volume of The Penny Stock
This is the first and the most accurate and advance step through which you can remove all bad penny stocks out of your watchlist….🌺
If you follow this step properly then you don’t need to check any other things….
You just need to go and check the daily traded volume of that stock, if it’s very low then it’s a illiquid penny stock and you should stay away from that…..🌺
But if the daily traded volume is very high then it’s a highly liquid penny stock and a good penny stock too, you won’t face any problem while buying and selling this penny stock…
Maybe you are thinking that how much daily traded volume should I consider to judge if the penny stock is good or not, so here is the answer….🌺
If a penny stock has daily traded volume of just 10,000 or 20,000 or 100,000 or 500,000 shares then leave that penny stock, as per me, penny stocks having daily traded volume or average volume below one million are not good and I just stay away from that penny stock….
If a penny stock has daily traded volume or average volume above one million then it’s a good penny stock as per me, and the more volume the better the penny stock is….🌺
You can find average volume of any stock on NASDAQ’s official website…
2. Rechecking The Volume
Okay, you have found penny stocks with daily traded volume above one million, now, you need to recheck that volume by adding volume indicator on the charts of those penny stocks…..🌺
Now, why I am saying you to recheck the volume?
Well, this is because price manipulation and volume manipulation are very common in penny stocks so I am saying you to recheck the volume….🌺
The penny stock that you have may have volume above one million but you need to check on charts that when that volume come in that stock….
I have seen some stocks which have volume above one million but that one million volume came in that stock in last 5 minutes, in rest trading hours there was no volume in that stock and there I understood, that this penny stock is a trap….🌺
So, to stay away from penny stocks which are bad, you should recheck volume of each penny stocks on charts to know exactly whether there is consistent volume in that penny stock or it’s a volume trap….
If you find that there is a consistent volume in a penny stock then it’s a good penny stock but if there is no consistent volume and most of the volume build up in 5-10 mins and rest the stock has zero or low volume then stay away from that stock….🌺
3. Check Last Six Months Volume History
To more confirm, a penny stock is good or not, you should check last six months volume history of that stock….🌺
Now, i am saying you to do this because I have seen many penny stocks who currently have huge volumes but when I went and check their volume history then in past they were a illiquid stock and i doubt huge current volume because we don’t know when the current volume dries up and the stock become illiquid stock again…
And that’s why, you should check past six months volume history, to know if there was the same volume that you are seeing today in that stock, if there was the same volume then it’s a good penny stock otherwise it’s not….🌺
You can find historical volume data of any stock on NASDAQ’s official website…
4. Check Chart of That Penny Stock
There’s a lot of difference between the chart of a good and bad penny stock, take a look here….⤵️
This⬆️ is the chart of a good penny stock in which chart look normal and candles are continuous because of good trading volume. Now, look at the image below…⤵️
And this ⬆️ is the chart of a bad penny stock in which chart doesn’t look normal and candles are not continuous because of less volume….🌺
So, you should always check chart of a penny stock to know whether it’s good or bad…..👍
I have used 5 min chart time frame in both the image above….
Now, the above points which I have mentioned were good for a retail traders who want to take a swing or positional trade in a penny stock and the points which I am going to discuss below are helpful for those who want to do investment in a penny stock….🌺
5. Official Website is Must
In today’s world, from every small business to big business, almost every business have their own website….🌺
So, if to know whether a penny stock is good or not, just go on Google, and search if that penny stock company has their own official website, if they have then it’s a good point but if not then it’s a really bad point….
6. Social Media Presence is Must Too
Apple is a big, good, and a reputed company. Now, if you go and check then you will find that they are available on every social media platforms from YouTube to Facebook and this is a sign of a good company….🌺
So, to check whether a penny stock is good or not then go and check on YouTube, Facebook, Twitter, Instagram, etc.
If they are available there and they have good views then it’s a sign that that penny stock is good but if they are not available on major social media platforms then it’s not a good thing and this is a sign that that penny stock is not good….🌺
7. Do Analysis of That Company and Their Business
If somebody asks you about Apple company then what would you say?
It’s obvious that you will say, Apple is really a good company, their products are really good and for long term use and they are performing really well in their industry…🌺
Now, you were able to say this about Apple company because you know about it, you have used Apple products and that’s why you are saying, Apple is a good company….
So, to check whether a penny stock is good or not, you should do the same analysis on that penny stock….🌺
You need to check if that penny stock company is good or not, if their products are good or not, are they performing the best in their industry, is there industry growing or diminishing, are they competing well in their industry, etc.
After getting all these answers about that penny stock company, you will be able to know if it’s a good penny stock or a bad penny stock….🌺
Pro Tip
If you are still reading then I have a pro tip for you if you are investing in penny stocks….🌺
You should always diversify your portfolio i.e avoid investing all your money in a single penny stock because that can be risky instead invest in 4-5 penny stocks, it will be more safer than investing in only 1 penny stock….🌺
And also avoid investing only in penny stock because there are many big stocks too….👍
So, these were the seven points which if you check before investing in a penny stock then I am sure that you will always choose a good penny stock not a bad one…🌺
And that’s it for today, hope you liked it….
Will see you again, till that take care and stay ahead….
Bye and Peace…👍🌺
[Charts By TradingView]