If you are interested in a particular stock look out for any penny stock short sellers. Short sellers have to borrow stock from brokers to sell the stock as they do not already own it. They hope the price will fall significantly so that they can buy back the shares at a much lower price, make a profit and return the shares to the stock lender.

This is a very risky way of stock speculating and is usually only carried out by experienced investors. Such investors carry out a great deal of research and would be expected to have a good reason to be shorting the stock.

A short seller may short a stock because he expects the company to default on a loan, for example. It is important for you to try and determine why a stock is being shorted and to only invest in that stock is you fundamentally disagree with the reason.

Otherwise if you are aware that a particular penny stock is being shorted, stay well clear.

Dave J.

When picking penny stocks via an internet news or information service it help if you refine your search criteria.

Over time you should could compile a list of your own keyword phrases to use. Perhaps you have a particular interest in oil stocks or internet stocks. Base your keyword phrases when searching for penny stocks around hot areas, sectors, products, people and places.

Here are some other keywords that crop up time and again in our penny stock searches:-

• OTC
• pink sheets
• listing
• featured
• recommended
• internet
• profit
• merger

Todd B

One good way to determine your penny stock selection criteria is to use a news service like Businesswire.com.

This is a news service that collects press releases from public and private companies and then sends out the release on its business wire. Publications can then decide which releases they want to use in their business news sections. As an individual penny stock investor you can also log in to the service and read all the daily press releases yourself. Information direct from the companies.

Naturally you will not want to read every single article so it is important that you filter the information by using relevant keyword phrases in your article searches. As you are primarily interested in penny stocks you could start with a keyword phrase including OTC.

You may want to couple that with the industry name you are interested in, for example, ‘OTC Mining’. You certainly want to refine your search beyond ‘penny stock’. Scan the article headlines and read the articles that interest you. Then do a further search using the company name.

Try to get into the habit of scanning the press releases on a daily basis, preferably first thing in the morning.

Dave J

Gotta tell ya about the TradeSight Small Cap Report.

It really is the business. It’s not cheap but then you get what you pay for in this world, right?

Tradesight have been around for nearly a decade and these guys really know what they are doing.

The emphasis is on training and teaching you how to be a pro investor.

They have various reports available but the one we are interested in here is their twice weekly Small Cap report.

Not strictly penny shares but check out our TradeSight Small Cap Report Review here.

Todd B

Penny Stock message boards can be very useful to the penny stock investor as they focus on one stock at a time.

Beware though as you will still encounter the problem of other penny stock investors being over optimistic about their own stock picks. Over exited investors will make wild unfounded claims about their stocks potential.

You will also come across investors posting negative information or even false information about a stock. They could be shorting the stock and wish to push the price down so they can close out their position by buying later at a lower price. Or they could simply be trying to get other investors to sell their holding so that they can force the price down and buy at the lower price.

But penny stock message boards are helpful in that there is a lot of information about the company. It is then up to you to verify that information and any significant information should be verified with the company itself.

Todd B

Which online stock broker to pick, especially when you are dealing in penny shares.

There are some great ones out there and we are starting to compile some comprehensive reviews over on our sister site, MarketcapMania.

Feel free to check out our online stock broker reviews at that site. We’ll be adding more broker reviews over the next few weeks but would advise that for penny share trading Zecco.com is as good as any with trades from just $4.50 / trade. You can get 10 free trades a month as well provided you are an active trader (more than 25 trades per month) or if you leave $25,000 on deposit with them.

Todd B

Penny Stock Chat Rooms can be a tricky place to collect penny stock information.

Sure, you can chat in real time with other penny stock investors, discuss individual stocks, market conditions, recent economic and political events but there are many people who use chat rooms to promote a stock in which they have an interest.

They will generate interest and excitement over a stock they are holding in the hope that people will pile in and buy the stock driving up the price. Once the price rises they sell out.

However chat rooms can be beneficial to penny stock investors who want to be exposed to new stocks to take a look at. Listen out for regular mentions of a particular stock and then do your own research. Just don’t use a chat room as your sole reason for determining if a stock is a good investment.

Chat rooms are also useful for asking other penny stock investors generic information like how to choose a penny stock broker.

Dave J

Review penny stock company company filings to assess their financial strength.

Be sure to look at quarterly as well as annual filings of financial information.

But as well as financial information be sure to check for any instances of legal filings and proceedings. Has the company been involved in any legal proceedings, why and what was the outcome?

Just because a company has been sued may not necessarily be a bad thing either.

A penny stock company could have been sued by a Contractor for non-payment but in reality the company refused to pay for a badly done job or breach of contract.

On the other hand if a group of shareholders are suing for fraud that is clearly a very different matter.

Todd B