Welcome to our free training on penny stocks. In this training I plan on providing investors and traders with enough information to give them a foundation to build on. Penny stocks and stocks in general take a lot of effort, skill, and a bit of luck. Here is a basic and simple step by step process to help you get started.
The first thing I would recommend doing if you haven’t already is making sure you are in the right mindset. Jump on YouTube. Listen to motivational speakers like Tony Robbins, Will Smith, and others. You want to be in the right mindset to attract success. Once you are in the correct mindset define what success is for you. Get out a piece of paper and Detail exactly what your goals are. Attach emotion to those goals. Put those goals in a place where you can see them daily. Start every day with Positive Affirmations. You need to believe you are worthy of your goals.
Once you have defined and committed yourself to your goals and that trading penny stocks is a set to help you accomplish those goals you are ready to begin the next steps.
Setting up a brokerage account.
You will need this to need this to be able to trade stocks. There are different brokerage accounts that work better for different purposes. If you are looking to trade penny stocks the best brokerage accounts are Etrade and TD Ameritrade(they allow you to trade more penny stocks). If you have limited funds and an account under $300 you can consider Robinhood. Robinhood doesn’t charge broker commission so that will save you $7-10 a trade but the downside is that they don’t allow you to trade as many stocks as the other brokerages.
Websites and resources that will help
OTCmarkets.com this is a website that provides information about each company. Everything from charts, Share Structure, to SEC filings and press releases. This site is one of the most helpful and important you can use.
Stockcharts.com This site provides free charts to use. It allows you to look at a bunch of different technical signals which can help you get an idea of what the stock price will do next.
https://www.sec.gov/edgar/searchedgar/companysearch.html This is the URL where you can search and find all the SEC fillings for a company. SEC filings will be used to find out what the is really doing. What it’s finances look like.
Ihub– This is a message board/ forum website that a lot of investors use. We will show how you can use this site later to expose pumpers.
Twitter/Instagram/facebook These social sites are good to join and keep connected as well. They help you keep up to date with what is going on and which traders/pumpers are hot.
You will also want to find access to level 2. Level 2 is very important when it comes to trading stocks. Some people also use different scanners to find stocks that are ready to break out. There are many YouTube videos on how to use these scanners. Personally, I have always networked with traders and investors who already were great at reading scanners. Networking allows you to work as efficiently as possible.
Make sure you sign up for our watch list. We not only send out alerts of stocks ready to break out from time to time but we also send out weekly watch list for stocks that either have rumors of future news, look great chart wise, or our scanners have picked them out as potential break out stocks.
Once you receive stocks on our watch list it is import to check them out for yourself. I am going to jump right in to using OTCmarkets. If you run across any terms you are not familiar with please go visit our stock market terms page. There are several ways to approach investigating a stock. Some may choose to check out facebook or Twitter first to see if people are already pumping it. Others will jump on IHUB. Some people they will look immediately at the chart. For these steps we will be going to OTCmarkets first with the assumption that the chart already looks promising.
Once you have logged in select a stock that you want to search. Type the name or ticker symbol into the top left. We will be using the example of MJNA. Click on the company profile page.
Highlighted and circled in red on the image are some important things we will want to quickly locate.
A. The company website. I always start by making sure the company has a website and that they keep it updated. If they forget to renew their domains or they let their website go it can be a huge warning sign
B. Make sure the company is current. There are several different types of stocks depending on how transparent they are willing to be with the company fillings. Companies should always be able to keep a status. Companies that are Pink limited, Pink no information, or grey market are a lot more risky and a lot of times hiding that information so they can take advantage of people.
C. This is the share structure of a company. First thing I look at is market cap. This is the total market value of the company’s outstanding shares. In penny stocks, most of these companies are extremely overpriced. If a company has a market cap of hundreds of millions but only have a net income of $20,000 that should raise some red flags. Keep in mind most these companies are set up just to get people excited so they will buy shares. Most of these companies have zero chance of ever becoming strong legitimate companies. That doesn’t mean you can make money trading them is you understand the psychology behind how they work. The next important thing to pay attention to is authorized shares. Companies with huge number of Authorized shares can at anytime start printing more stock with will dilute the shareholder value and make the stock go down. It is always good to check and make sure the company’s outstanding shares haven’t went up a ton in the past couple of years. If they have this is a huge red flag as well.
D. This is a link to the Transfer Agent. You will want to call the TA and verify all the information you are seeing. Some company’s gag their Transfer Agencies. That should raise red flags if they do.
E. This is a section where you can find out about the company’s history when it comes to share splits. When a company does a share decrease it is known as a reverse split. If a company only applies the share decrease to the Outstanding shares and doesn’t apply an equal increase to the Authorized shares this is a huge negative thing. It means the company plans on diluting more shareholder value and the stock most likely will come down a long way. Reverse Split and Authorized share increase are very bad news for penny stocks. If the company has a history of Reverse Splits (Share decreases) you may want to avoid that stock all together.
The next thing we want to look at is Filings and Disclosures. You can click on the left side tab. Demonstrated in this photo here.
The most important things to locate first are the earning statements and well as read any possible important updates.
A. 8-k these are good to read through quickly to see if the company has recently filed to have a reserve split or an Authorized share increase. Be very cautious if you find out the company has recently had a Reverse Split of a Authorized Share increase.
B. This is the last reported quarterly report for the company. Double check this is updated and accurate on the SEC filings site mentioned above. Some companies choose to file with OTC and not with the SEC. I am always a little bit cautious of those companies.
The next step from here will be looking at the SEC Fillings. On our SEC fillings page, we will be explaining briefly some important things to look for.