Penny stocks – either you love them or you hate them. There is no middle ground with these investments that offer the best returns on investments with minimal capital on one hand but also pose the highest risks for losses on the other hand. We must take note that microcap shares have the double risks of low liquidity with high volatility levels, the combination dreaded by even the most naive trader and investor out there.

Then again, why choose to look at the bad side of penny stocks when the good side is a better path to go? The trick with being successful in microcap shares is to know, accept and overcome its dangers while taking full advantage of its merits. Here then are the best ways to achieve such a double purpose.

What Makes A Great Penny Stock?

Although there are many ways to define a great penny stock, the general consensus is that it must present the greatest profit potential in the shortest possible amount of time. Such a definition is, of course, applicable to other stock investments like the blue-chips. After all, every businessman wants to recover his investment, earn the desired income and then invest the money again to begin yet another cycle of wealth accumulation as soon as practicable.

Specifically speaking, your idea of the best penny stocks will possess the following criteria:

• It is traded over the Nasdaq SmallCap Market since its listed companies are obligated to comply with strict listing standards, reporting requirements and other regulatory measures. In the process, investors are privy to reliable quantitative and qualitative information that makes for better decision as to the profit potential of the stocks being studied.

Or it may be that the issuing company must belong to the Trusted Tier of the Pink Sheets as well as classified as a compliant company under the OTC Bulletin Board guidelines.

• Its financial aspects are in good order. We are talking about an upward trend in revenues; high levels of liquidity, stability and solvency; and a high price-to-earnings ratio. It is also a good idea to look at the capability of the management to steer the company in the right direction.

Where to Find Great Penny Stocks?

As implied, penny stocks are not traded on the Big Boards. Instead, you can find them being traded, so to speak, on the Nasdaq SmallCaps Market, the OTC Bulletin Board and the Pink Quotes. The best penny stocks are lumped with the worst penny stocks the industry has ever known so it pays to know how to separate the good from the bad.

How to Find A Great Penny Stock?

As is the case with other investments but more so with penny stocks because of its inherent dangers, reliable, relevant and sufficient knowledge is the key to finding the best penny stocks. You can take note of the following recommendations:

• Use the tools, techniques and technologies available in the online brokerage sites.
• Be updated on the latest news about penny stocks through industry newsletters, online forums and even television shows.
• Use the gathered information to perform your own analysis and evaluation of the recommended penny stocks.
• Adopt an entry and exit strategy.

Indeed, the task of finding the best penny stocks takes work but the profits are well worth it.