How to choose penny stocks?

[SaintessHeart]

Originally Posted by ChainLegacy

You can try your luck at the foreign exchange market... but pretty much every option that can potentially make you money quickly also carries high risk.

That will depend on how much leverage he can get with $500. Not alot, probably only $5k at most, and wholly insufficient to earn $4k.

The recommended capital is $1k to leverage on $10k to be able to see real dividends in hundreds. But it still takes plenty of practice to be able to make like $3k per month with $10k from leverage.

[guest]

I have got to try. It's either this or facing the consequences two months later. Can you give me some information about the foreign stocking trading you mentioned earlier? I figure I can do it during the night. How to do that and where to find more information?

[ChainLegacy]

It is foreign currency exchange. You attempt to profit off of the international exchange rates and their fluctuations. There's plenty of reading material on the web, google forex or foreign currency exchange, there will probably be some guides.

[LynnieS]

Forex uses margin as well, I see. If you are not already, be careful of this. While you can leverage yourself up into buying more, that is still the house's money with which you are playing. Aside from the interest you have to pay (can't imagine the house giving people free cash...), if the forex side behaves like the equities one, should your margin account fall under the margin limit, you will get a margin call from your broker. If you don't re-top up your account, they can liquidate your holding(s) without your go-ahead.

From an investor's POV, that's not so good. From a speculator's, even worse. Odds are, you also might not be able to go to the courts should you disagree with something; arbitration is normally mandated by the contract that you signed at the start. That's not always bad, but it's also not the court system with its rules and precedents, IMHO.

Forex is - or was... - pretty hot in Japan these days. There are ads on the trains these days showing happy ex-salarymen using their mobile phones to look up their holdings and so on. Books have been written over the past 1-2 years as well. At the same time, there have been stories of those who heard of the hype, tried it, and lost everything that they put in.

Spoiler for Financial options:

Aside from these, there is also the options trading - although I'm not sure how far you'd get with an initial US$500 investment. There are... 2(?) ways you make money. (1) You see a mis-pricing of the option, take advantage of it, and cash out when everyone else sees the same. (2) You have a view of a specific stock/etc.'s future, buy options based on that, and then cash out when you hit expiry or before (American type options only).

People tend to jump in, it seems, in order to leverage their funds. It's harder than trading ordinary stocks as you have more factors to track. The 1st way requires you to be right faster than the "big boys", and that's hard unless your math models are consistently right. The 2nd way needs for you to keep track of analysis on both the option and its underlier. It's doable, but to be consistently profitable, it takes hard control of your emotions and often, being willing to cut your losses. With a small investment, the 2nd would, IMHO, likely be very hard for you.

The same consideration would go for trading forex as well, I feel.

BTW, I do not recommend you getting into options, esp. if you have little money and are in a hurry.

You haven't said why or to whom you will owe the US$4000 in 2 months, and you are not under any pressure to do that - at least, not from me.

Spoiler for Possible actions for thought - no order of preference:

I would suggest that you try and get a loan from your bank (if possible), but the big banks, lending-wise, were not really doing this. If you are banking at a smaller bank or credit union, you might have better luck.

Some companies may also have some kind of a salary advance plan in place where an employee can borrow against his future salary, and then repay the loan through deductions or something. If you haven't already looked into this, you may want to give it a try.

The 3rd is to try and renegotiate with the people to whom you will owe the money now. Unless we are talking loan sharks or someone similar, people usually appreciate being given a head's up about money matters. If you can work up a repayment/installment plan, that might be better and safer. If you decide to do this, start on it now. Paperwork alone will take more time these days.

The 4th possibility is to borrow from your family and/or close friends, but I'm guessing that you (1) had already tried this or (2) know that they cannot help. If you haven't, though, it can be better, but I would recommend that you put the terms of the loan on paper. You don't want to risk damaging your relationships over this should people disagree about the terms later.

One of these four + buying/reselling goods may be able to get you through this in time. Trading... can be risky, IMHO. Good luck!

[guest]

I looked into the foreign currency trading and it seems very complicated, maybe way too complicated for me to deal with in two months. But I haven't taken that off the table just yet. It does seem that penny stock trading is my only option for now. I only know that I need to start reading the wall street journal. What other websites, newspapers, or whatever would you recommend reading? As for why I am in such a situation, please spare me. It doesn't involve gambling or anything illegal, I assure you. Hasn't anyone been in a pinch when something bad just happened and throw you in to a, urr, disaster?

[SaintessHeart]

Originally Posted by LynnieS

Spoiler for Financial options:

Aside from these, there is also the options trading - although I'm not sure how far you'd get with an initial US$500 investment. There are... 2(?) ways you make money. (1) You see a mis-pricing of the option, take advantage of it, and cash out when everyone else sees the same. (2) You have a view of a specific stock/etc.'s future, buy options based on that, and then cash out when you hit expiry or before (American type options only).

$500 isn't enough for options trading. You need at least a $2k. Besides, the odds are more speculative rather than technical.

Originally Posted by guest

I looked into the foreign currency trading and it seems very complicated, maybe way too complicated for me to deal with in two months. But I haven't taken that off the table just yet. It does seem that penny stock trading is my only option for now. I only know that I need to start reading the wall street journal. What other websites, newspapers, or whatever would you recommend reading? As for why I am in such a situation, please spare me. It doesn't involve gambling or anything illegal, I assure you. Hasn't anyone been in a pinch when something bad just happened and throw you in to a, urr, disaster?

Trading is THAT complicated, no matter what financial instruments. And reading WSJ doesn't help, in this electronic world, those news are already considered dated by hours, and the buyout/sellout already happened a few minutes ago.

When you are doing stock market, the best way is still the Warren Buffett way : fundamental analysis. Learning how to read financial statements the hard way rather than relying on news is so much more reliable. And how are you going to analyse a company's worth with doctored data?

Right now the biggest disaster I have is that I owe a university $10k at a rate of $2k every 2 months. And I don't have a job. But I don't trade penny stocks with the $200 of savings I have left.

Why don't you tell us what is wrong? It isn't easy for us to help when you put forward dumb solutions.

[LynnieS]

Originally Posted by SaintessHeart

$500 isn't enough for options trading. You need at least a $2k. Besides, the odds are more speculative rather than technical.

I agree with the first. Even with margin, you couldn't do much with just US$500. The minimum required for an account is usually higher. On the 2nd, though, not really. Option valuation, at least, is very much mathematically- and (at least for the big boys) computationally-intensive. The entire "betting" that usually gets done by retail guys is, unfortunately, more speculative - although you could do a technical analysis on the underlier side to see if you can get a feel for *TM decision.

I'm not a licensed financial advisor, though, and even if I am one, I would not give any advice of this nature without first speaking to him to know his risk profile and tolerances. It's just too risky, IMHO, but I'm going off-topic here, so will stop now.

Originally Posted by SaintessHeart

Trading is THAT complicated, no matter what financial instruments. And reading WSJ doesn't help, in this electronic world, those news are already considered dated by hours, and the buyout/sellout already happened a few minutes ago.

The WSJ isn't really geared toward investors, IMHO. I used to like Value Line, but the company had a rather nasty legal problem recently; I don't think that it affected the research side, but it got a bit tainted for my taste. There is also Investor's Business Daily to which I used to subscribe 6+ years ago; things, I'm sure, have changed since then.

guest, try taking a look at your local library to see if it has more resources that it can recommend; there are also lots of books in any large bookstore in the U.S., but reading - let alone understanding - them will take a lot of time. If you know accounting or can pick up how to analyze financial statements, the SEC's EDGAR database (lots of documents available on-line) can be of help if you are looking at U.S.-based companies.

Originally Posted by SaintessHeart

Right now the biggest disaster I have is that I owe a university $10k at a rate of $2k every 2 months. And I don't have a job. But I don't trade penny stocks with the $200 of savings I have left.

Why don't you tell us what is wrong? It isn't easy for us to help when you put forward dumb solutions.

I agree with SaintessHeart in the sentiment - that if all you have is just US$500 for "mad money" that you don't actually need for an emergency, trading anything - let alone penny stocks - is really not a good idea. I'm not sure if any of the 4 suggestions I gave earlier is good for your situation - not to mention mg1942's as well - but if possible, do try and renegotiate your upcoming debt as one possible try.