SPEND ANY TIME AROUND

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.

FIVE GOLDEN RULES FOR

INVESTING IN PENNY STOCKS
With that in mind, you might think that its not worth investing in
But in case you
penny stocks. think I just cherry-
picked a winning
Wrong! Theres a fortune up for grabs. But if you dont want to get penny stock
burned, its critical that you go about it in the right way. Heres how example, let me
warn you penny
stocks can tank
THE PROOF IS IN THE PROFITS just as easily, too.
Just because a
If youre skeptical about investing in penny stocks, consider ION
stock is cheap
Geophysical (IO): which provides seismic imaging for the oil and doesnt mean
gas industry. the only way is
up. It could get
I first recommended the stock to my WSD Insider subscribers at a even cheaper.
bargain-basement price of $4 per share when Wall Street wouldnt
dare pay it any attention. But we cashed out with profits of 151%.

A gain like this makes penny stocks worth a closer look.

But in case you think I just cherry-picked a winning penny stock

example, let me warn you penny stocks can tank just as easily,
too. Just because a stock is cheap doesnt mean the only way is up.
It could get even cheaper.

Thats exactly why I recommend that you adhere to the following five
rules when investing in such a speculative corner of the market

FIVE RULES FOR TRADING PENNY STOCKS

RULE #1
Focus on Fundamentals: A cheap stock price is no reason
to abandon sound financial analysis. In fact, its even more
important that you conduct proper due diligence. Be picky
when investing in penny stocks. Insist on buying companies
with solid and improving fundamentals. That means looking
for strong sales, profits, cash flow, margins and return on equity,
with manageable debt.

FIVE GOLDEN RULES FOR

INVESTING IN PENNY STOCKS 3
 RULE #2
Limit Your Investments to $1,000 or Less: By making small bets on penny stocks, you can
limit your downside risk and rest easier, knowing that a total loss wont torpedo your entire
portfolio. If you want to wager slightly more, thats up to you. But dont wager too much, or
else youll undermine any efforts to reduce your risk.

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.

Ahead of the tape,

Louis Basenese
Chief Investment Strategist, Wall Street Daily

FIVE GOLDEN RULES FOR

INVESTING IN PENNY STOCKS 4
 TRUTH
In a world of liars, the starts here.

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