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Remember that even bad companies can really increase in price, while companies are really great prices fall. In the long term however, companies Penny Stock with weak bases tend to find any increase in prices is not sustainable. You should try to find penny stock companies with strong fundamentals, and the litmus test is the first step to do.

Penny Stock The acid test criteria:

* Exchange: what the stock market does not trade currency? If it is on the Pink Sheets, stay away from her. With markets "Pink Sheet", the information requirements, and therefore the size of firms are very small. In terms of market shares of low prices, OTC-BB is better, while the Nasdaq, NYSE and Amex are the best.

* Rate of recent activity whether the shares have more than tripled in the last 6 months, on foot. While the actions of May have yet to go, there is a greater likelihood that the action penny stocks is due to a correction. In fact, you may have only heard of the shares due to the recent price activity, like thousands of people have learned about it with family and friends and chat online. Worst scenario is that it was actually a bomb-and-dump stock or promotion, in this case, certainly can expect stock prices to come back to earth.

* Financial strength: its level of debt compared to revenues and profits. How long would it take, according to their current earnings to pay your debt? How many times are their commitments to their assets? They increased sales from one quarter to another?

Unfortunately, most investors do not even take this step. Buying penny stocks based on the concept or "story" of the underlying company, but never realize that the debt bubble is big enough to cripple or crush the underlying investments.

* Industry Group, if at the forefront of industry "hot" on foot. In all likelihood, you've heard of them Like thousands of others have done, because they are on a business topic currently fashionable. This usually means that stock prices are driven up already, and are lower than above.

Remember, when you hear about a hot stock or hot sector, which is already too late.

* Recent trading activity: the daily trading volume increased progressively and sustained (which is a bullish sign)? Is the total volume of the larger transactions, with tens of thousands of shares changing hands at a minimum, and ideally, hundreds of thousands of people on average.

* Volatility: shares rebound in overall good health around a little bit, but no news or events. You want avoid penny stocks, where stocks of the horizontal and the lifeless trade. Also, Beware of companies with significant differences between supply and ask prices. While a large difference may indicate a high or low in price, it can also be a symptom of a death in their actions follow.

After to pass this litmus test for rapid, you still think your idea of the investment could be good, now is the time for the next step. It really put the company at the same speed through Leeds Analysis. If you pass this important step, you could be sitting on a winning company with enormous growth potential.

Peter Leeds Penny Stock Credentials

Through his newsletter, Peter Leeds and his team analyze and profile the best penny stock companies which may be trading for pennies per share.

Peter Leeds on Wikipedia

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