Penny stocks have been given a bad reputation unfortunately. If you are a new investor and decide to ask a stock investor how to buy top stock picks or buy penny stocks, many of them would tell you to stay clear of them. This is because penny stock trading can be very risky. This is largely due to the fact that these companies can be manipulated easily and they have a lack of financial reporting sometimes.

This does NOT mean that there aren’t plenty of legitimate penny stocks in the market. Many penny stocks are companies that are just starting out. Some great companies had to start somewhere. It is true that many penny stock companies do go out of business but the key is to find the ones who have a chance to succeed. The huge profits that penny stocks are capable of producing may outweigh the risks!

Researching is one of the most important things you can do when it comes to penny stock trading. You must do as much due diligence as you possible can before putting a penny into any penny stock. You should get information on reports such as the potential earning power of the company, check their financial record, find out what kind of competition is within the industry and trying to find the outlook of the company’s direction with its business model. These are all pieces of knowledge you should have to get a feel for the potential earnings and risks involved.

It is also suggested that once you get through with the fundamental analysis that you should also do some technical analysis. You can start by analyzing data and following trends and charts. This is the best approach toward successfully buying stocks. Doing it all on paper for the first few days or weeks can also help you see if you can recognize profitable stocks.

Never be greedy. Knowing when to sell a penny stock is just as important as knowing which ones to buy. Learn how to swing with the momentum and to get out before it’s too late. Any profit can be a good profit.