One of the hardest topics I have found to find information about is a "buying strategy" for Penny Stocks. Tim Sykes is an amazing trend spotter for shorting penny stocks and I watched a clip of the "Spikability" which seems to show a very good strategy to pick out spikes. Very profitable and I will be looking to purchase that video lesson to learn what I can. I have started to look at penny stocks and by penny stocks I should say anything under $0.50. My strategy starts here only because of the little amount of money that I have be driven down to. 

I started with $3,580 on ShareBuilder trading. I was dwindled down to a withdrawal of $1,525.96. Yes I have lost over 50% of my money trading penny stocks without knowing brokerage charges. Many beginner mistakes and gambling. I then opened up an account on TDAmeritrade because of them not having fees per share for penny stocks. I started with total deposits of $2,150. I really started looking more into the stock market and reading a lot more. I started to try to trade off of Stock Market "Norms" like T/A, candle patterns, fibonacci, elliot wave, and a few others that I am still working on and learning about. I was succesful on one trade so far and that was a morning spike on TRXC just calling a break out and playing a bounce. 

I was also successful on ATOS calling a fibonacci retracement bounce in which I actually lost $12 because I didn't pull out on my 10% gain like I had wanted to. Learning the hard way is what suits my personality. Brutal in this "game" we play but worth it. Makes you work harder. 

So I have since started to try to develope my own strategies as well as learn off of others. So far I have placed two trades off of the strategy that I am about to explain. I am currently up 423.5% on WFMC and I just placed a trade on BTZO using this outline. Currently BTZO has not moved since I bought into it last week. 

Alright on to the strategy. 

So what I have been looking for when looking at these "piece of crap stocks" is trying to find the "not so piece of crap stocks". There is a saying "Trade the Ticker, Don't fall in love with it". That is not what I am doing here. I am giving an educated guess to increase my probabilities of a higher than average return. There are complete piece of crap tickers that are pumped and this is what Tim Sykes speaks about all the time and you can earn so much by paying attention to that specific strategy. Actually just recently I found a "Pumper" that has had incredible success over the last two "Pumps" and I may buy into the next one early and try to gain some profit off of it. I'll let you know how that pans out. 

Alright, so I will just list below what I have found to be helpful in picking out the "1 in 50,000" penny stocks that is "not so much a piece of crap". What I look for when Buying a Penny Stock:

1. Is the stock currently being pumped? (Would like to NOT see a pump)

• Normally when a stock is promoted or pumped the crash is inevitable. For me when looking to actually buy a penny stock I do not want to see this. It would mean that the gain is short term and I want a slow and steady rise. Why?, because I am able to sell shares to get my initial investment back while having shares in the stock to be able to gain more money as the legitimacy of the company becomes more apparent or I can sell when it starts going down but at least there is no more risk.

2. Is the stock in a market that is on the move? (Hot Topic market)

• A stock that is "marketing" a product that is currently in the News is a great opportunity. If it's a "real" product". This is a sketchy area and you have to put in the time to research a little bit if you really want to make an educated decision. Sometimes these can turn into runners only to find out there product was worthless. 

3. Does the Company have a profitable profit margin? (Check 10Q / 10Ks)

• This is an area will you will weed out the piece of craps and find the "not so piece of craps" down in pennyland. Up to date with filings and showing a Profitable Revenue stream is good for any Company but in "stinky pinkyland" it's almost unheard of.

4. Does the Company Have a lot of Convertible Debts (3 or more, or $100,000 or morea is a bad thing)?

• Convertible debts translate to Dilution. Nobody wants to buy into a company only for the debt holders to dilute it down to nothing because the Company is not paying them off. One key thing to look for is to see on the 10Qs if the Convertible debts have been slowly paid towards prior to the debts being able to be converted.

5. Is the stock currently undervalued?

• Basing off the revenue stream, profit margin, O/S, and P/E. Below is a brief Formula that I use: 

• Total Revenue x Net profit margin %

  Net profit / Current O/S as of latest 10Q = EPS

  EPS X Industry P/E Average = pps valuation

  http://biz.yahoo.com/p/422conameu.html

6. Are bears or bulls taking over the message boards?

• This is key to finding out if the stock can move or not. If the Bears are running the boards and yelling "Scam" or "Trash Company" or talking bad about the CEO it would be best to stay away. The reason is that, that is a sign of bag holders who for one reason or another will do everything it takes to kill any runs that the company may have. Even if they are legitimate.
• The opposite for the bull side of the house. If you find a "good" Company and bulls are on the boards it would be a good thing because there would not be any bagholders to hold the stock from running up

7. Are there any positive (NOT Pumps) blogs, analyst reports, news, etc.

• This is where Seeking Alpha or News Articles or PR's are good for the Company but are not "Paid Pumps" or some ridiculous statements. Normally if it comes out and it sounds to good to be true "ABC will go up 10,000%" then it probably is. Pay attention to who wrote the article and what stocks normally do when they write an article. Some writers have greater influences than others. 

8. Has the Company had a history of an R/S or Toxic Financing?

• This is a good history on the Company and CEO. It will give indicators of how he looks at shareholders. Normally an R/S in any Exchange is a no go. If it happens once it will most likely happen again. Also check to see what happened after the R/S. Did the CEO increase the A/S again? If so this points to a "share scam" dilution stock. 

As of right now it has made me profitable for the first time, well Ever. So I thought it may be something to send out to traders/investors who may have a really small account like mine but don't want to ride the "Pump Wave" or are looking for bigger returns than 5%-10% per trade. (Very respectable by the way. Just not with $2,150. Going all in maybe, but it's hard to go all in on any stock. This is more like $250 on a .0002 stock.) Smart, better probability trades is what I am trying to learn and give the opportunity for others to learn from my experience as I have learned from others.

I will post more results as they come in. Good Luck and if you found this helpful just let me know, or not it's all good.