The Concept of Time

Whereas the stock market is fast-paced, the Penny Stock market is even more fast-paced. Less volume, smaller point levels, and more investing individuals (compared to large companies with influential capital) all contribute to the quick, volatile environment associated with the lower exchanges. Where a situation can change in hours over the upper exchanges, a parallel situation can drastically change on the Penny Stock market within minutes of an important press release. Nevertheless, it is important to not fall into the mold of a fast-paced day trader. You are not that good.

I use the term “day-trading” liberally, because to every person it means something else. Investors who conduct several trades a day will assume this identity just as much as the person who executes a few trades a week. Bear in mind that day-trading typically fails by the rule of probability (the same rule that controls how many times flipping a quarter will give you heads or tails). Its foundation is weak because it’s based upon sentiment rather than actual tangible company progress. What typically results to the investor is a bleeding through commission charges that ultimately has a person licking his wounds or standing meagerly ahead of where he started (except with a longer tax filing).

Penny stock investing should entail a rational degree of sensible patience. It should not have you trading tens to hundreds of companies, although it should have you researching just as many. Penny stock investing is about finding the hidden gems existent on the market and allowing for tangible company progress to vindicate the investment on the market. It is about finding the companies that slipped the radar of the heavy investors and patiently watch as they rise like a Phoenix. Time is your greatest ally, but for the typical penny stock investor, it is also the very foe he willingly fights.

In this game, there is no need to bleed through compiling commissions. It’s about finding your horse and feeding him with time so that he will do all the work for you. After fully researching a company, still expect a company or two to die along this race, but do not be surprised when the rewards of the remaining horses fully vindicate all expended efforts.

Personally, these are my five horses (in order) that I’ve taken under my wing to nurture:

1) PNMS – Panamersa Corp.

2) PBLS – Phoenix Associates Land Syndicate

3) INTK – Industrial Nanotech, Inc.

4) USSE – U.S. Sustainable Energy Corp.

5) AGWS – Advanced Growing Systems, Inc.

Do NOT invest in any of these without having undertaken a substantial amount of research. Do not believe that this list is by any means exhaustive. I personally have seen several more horses out there to run with.

Choosing Your Brokerage

Every brokerage comes with the notable perks and areas in which it falls short in comparison to other firms. Nevertheless, there are only a few big names out there that circulate with the reputation of being trustworthy to host your money while you navigate the rocky seas of the financial markets. Naturally, some of these companies are more ideal towards penny stock investing than others. Here is a short & non-comprehensive list of some of the well-known brokerages commonly heard within penny stock communities.

1) E*trade

2) TD Ameritrade

3) Scotttrade

4) Zecco

5) Charles Schwab

6) Fidelity

7) Merrill Lynch & Co.

8) Vanguard

The following advice is just based on my own personal experience and from here-say. An ideal brokerage for penny stocks is one that provides low-commission trading, with minimal (if any) fees attached to maintaining an account with the company. From the list above, I would be as strict as say that your best bet in meeting this criterion is to immediately cross off everyone but E*trade, Ameritrade, Scottrade & Zecco. While the other four brokerages are well-suited for investments, they are not as geared towards the fast-paced online investor that seeks low commission equity trades.

Out of these four brokerage firms that I listed, I would go as far as to highlight Scottrade & Zecco. Scottrade has a lower commission schedule when compared to Etrade & Ameritrade, decent realtime trading tools, and adequate customer support. On the other hand, Zecco has 40 no-commision trades per month (Zecco stands for Zero Commission), terrible realtime trading tools, and questionable customer support. Neither firms have fees attached to maintaining accounts with their firms.

When it comes down to it, there’s a level of risk and reward that comes even from choosing brokerage firms. If you go with the new firm Zecco, no-commision trades provide a level of trading flexibility that every investor dreams about. If you’re more into the safety and well-being of your financial investments, a firm like Fidelity will cost you high commissions but the comfort of being established and secure.

On a side, but important note, several companies have been blamed by fellow penny stock investors to restricting the trading of certain stocks. This often gives rise to the belief that the company is conducting naked shorting operations with these securities. Whether this is true or not is irrelevant for now. Ameritrade happens to be the most common case I’ve come across, having restricted the trading of several penny stocks I’ve been involved in. In my personal opinion, Scottrade is the cleanest in regards to these kinds of records.

I personally have active accounts open with E*trade, Scottrade, Zecco, Fidelity, and Vanguard.