Basic Guidelines for New Traders

For day trading (flipping) stocks - before jumping into any penny play a new trader may want to do the following:


1. Check company out - can find company info at www.pinksheets.com (see Due Diligence forum - "helpful dd & t/a resource links' for more complete resource list - http://www.stockmarketcats.com/showthread.php?t=27

• Check o/s (outstanding share) count.

• note how many times company has changed directions (how many company names have they had and how frequently do they change names?)

2. Check pps (price per share) history along with volume to see how the stock has traded for the past 6 months to a year.

note: it is very important to Check the o/s along with the "high-low" pps and volume history before jumping into any play because many may 'think/believe' a stock is going higher and they may have very valid reasons for thinking this will be the case but it may not, and if you come in too high and it doesn't break out of its usual trading patterns then you will probably be stuck holding for quite some time. Not to mention - you could possibly lose your investment, which is not at all uncommon with penny stocks.

Additionally, if the company is a pink sheet stock (otc) then you can not rely on the o/s count listed because otc companies are not required to file with SEC and many companies do not update regularly. nor do many transfer agents supply this information to an investor. so when checking the o/s it is best to keep in mind that what you are seeing may not be accurate and there could possibly be many more shares in the o/s, which is another reason why checking the high-low pps history is crucial. if you see that a company has an o/s of a billion or more shares and has not broken out of a particular pps trading pattern then you may wanna proceed with the utmost caution.

3. Learn basic chart technical analysis (t/a). Gary's cd offers some very great info for those that want to learn some strategies quickly.


4. Highly recommend reading - Company Pump & Dumps And Red Flags Part 1 by Guapo - http://www.stockmarketcats.com/showthread.php?t=452


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What Investors may want to look for when researching a stock:

If you are day trading or investing short term the financials are not as important. However, if you are investing mid to longer term then check the Annnual Report (Form 10KSB/A) for the following:

- Balance sheet for assests versus liabilities.
- Income statement to determine how much money the company has generated versus how much they have lost.
- Cash flow to determine how the company is managing the money.
- Note outstanding shares company has issued.
- Note inside share holders and amount of shares they own.

Check Sec Filings for any

Sec filings Form 4
Sec filings From SB -2
Sec filings Form 8 -K

Note: to see what the basic sec forms mean see - http://www.stockmarketcats.com/showthread.php?t=448


If a company has good management, financial records and appeals to you, the next thing an investor might want to do is check out the PPS and Volume trading history. However, this information may not be available if the company has not been trading for at least 6 months.

Additionally, an investor may want to research how much of a market is out there for the product along with its competition. Is the product unique - is there a demand for the product - is there growth potential? What you want to look for is growth potential with good management.