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Ultimate Guide to Trading Penny Stocks

Get RICH Trading Penny Stock Promotions

The System




Michael  C.  Gunn  is  Proud  to  Present:
PennyStockFanatics.com’s  Ultimate
Guide  to  Trading  Penny  Stocks  TM
Table  of  Contents
                                               Introduction:  PennyStockFanatics.com’s  Ultimate  Guide  to  Trading  Penny  Stocks  TM
 

 

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 

Ch.  1.  Penny  Stocks
Ch.  2.  Strategies  for  Buying  Penny  Stocks  at  the  Lowest  Price
Ch.  3.  Don’t  “Chase”  Penny  Stocks  
Ch.  4.  Strategies  for  Selling  Penny  Stocks  at  the  Highest  Price
Ch.  5.  The  Trading  Dogma
Ch.  6.  Avoiding  Trading  Blunders
Ch.  7.  Expectations  (Will  I  Be  a  Millionaire  by  Next  Year?)
Ch.  8.  Getting  Started  (Choosing  a  Broker)
Ch.  9.  Disclaimer
Ch.  10.  Glossary  of  Common  Terms

About the Author:
Michael C. Gunn is an American financial author and securities investment educator with expertise in choosing and profiting from penny stocks. Michael C. Gunn
works with several informational sites focusing on penny stocks and publishes an investment newsletter (PennyStockFanatics.com).

Disclaimer: Penny  stock  trading  involves  substantial  risk,  so  always  research  every  alert  before  trading,  consult  with  a  licensed  professional  before  trading,  only  
invest  what  you  can  afford  to  lose,  and  always  trade  with  caution.  PennyStockFanatics.com  and  its  staff  are  NOT  licensed  investment  advisors  of  any  kind,  in  any  
jurisdiction.  Alerts  are  not  a  solicitation  or  recommendation  to  buy  securities,  but  merely  investment  ideas  that  should  NEVER  serve  as  the  basis  of  your  trading  
or  investment  decisions.  PennyStockFanatics.com  is  for  entertainment  purposes  only.  View  the  risks  of  investing  in  penny  stocks  at  www.sec.gov.

I NTRODUCTION

PennyStockFanatics.com’s Ultimate
Guide to Trading Penny Stocks TM

PennyStockFanatics.com’s Ultimate Guide to Trading Penny
Stocks TM is brought to you by Michael C. Gunn and
PennyStockFanatics.com, the most highly trusted free penny
stock newsletter alert service on the market. This is the perfect
guidebook for beginners or even experienced investors, traders, or any individuals seeking fundamental knowledge required to expand their portfolios to include potentially the
most highly lucrative investment market in existence.




Just a little bit about our 100% FREE service…

PennyStockFanatics.com is a rapidly expanding small and
micro-cap (penny stock) investing resource that consists of investors ranging from beginner to the highly savvy, stock traders, and thousands of highly active subscribers! We specialize

in penny stocks demonstrating extreme short-term price
movements triggered by abrupt speculative corporate developments, breaking news, awareness campaigns, breakout patterns, and reverse mergers. PennyStockFanatics.com, is dedicated to teaching our subscribers the key to consistently capturing tremendous short-term gains trading penny stocks as
well as emailing two to four of our most lucrative penny stock
alerts per month 100% FREE right before the stocks EXPLODE!

Our rapidly expanding group of thousands of loyal subscribers
is constantly receiving additional educational tools and secret
trading strategies. The PennyStockFanatics.com team is growing by leaps and bounds, and our penny stock alerts just keep
getting better and better! Don't miss out, visit
PennyStockFanatics.com and subscribe for free, and reap the
rewards by joining the most trusted penny stock alert service
in the market today!

Also, check out Michael C. Gunn’s Premium Promoter Alerts
Service at PennyStockFanatics.com, where you will learn the
BIGGEST SECRET on Wall Street is penny stock super rallies
that are frequently the direct result of professional stock promoters! PennyStockFanatics.com has analyzed years of historical performance data from over 1000 stock promoters and
compiled an elite list (top 1% based on performance)! We have
discovered that ONLY our proprietary elite list of top 1% of
2

stock promoters can produce predictable reproducible and
highly lucrative gains time and time again. 20 out of 20 of the
last stocks promoted from our proprietary top 1% of stock promoters experienced epic gains. Michael C. Gunn’s Premium
Promoter Alerts Service members will receive our revolutionary stock promotion trading book, the only one of its kind
available to the public, and can expect to receive two to three
stock alerts from our top 1% of all stock promotions per
month in their email inbox the moment the promotion campaign begins. This allows our VIP members the opportunity to
acquire the absolute lowest possible share price. Visit Michael
C. Gunn’s Premium Promoter Alerts Service at
PennyStockFanatics.com to become a premium member now,
and join an exclusive group of stock promotion traders who
are literally making thousands to hundreds of thousands of
dollars a year!

3

C HAPTER 1

Penny Stocks

Penny stocks, also known as small or micro-cap stocks, are
common shares of small public companies that trade between
$4.00 and $0.0001 per share. In the case of many penny
stocks, low market price inevitably leads to low market capitalization (total shares available multiplied by the current
price per share). Consequently, such stocks can be highly volatile and highly subject to experiencing extreme and rapid positive price movements triggered by speculation, breaking news,
reverse mergers, corporate developments, and professional
awareness campaigns. Penny stocks in the USA are often
traded over-the-counter (OTC) on the OTC bulletin board or
pink sheets. In the United States, both the SEC and FINRA
have specific rules to define and regulate the sale of penny
stocks.
Penny stocks offer investors several unique benefits, which
are absent in “big board” or large cap stocks such as Google,
Apple, or Microsoft.

1.
Penny stocks are offered at a low price per share. Penny
stocks are sold from $4.00 per share to as low as $0.0001 per
share. This can be attractive for new investors, because they
are given the opportunity to acquire a large volume of shares
of stock for a relatively marginal investment.
2.
Penny stocks can demonstrate extreme price movements
of 25% to over 1000% in a relatively short period of time. For
example, a penny stock can commonly rally from a share price
of $0.01 to $0.10 (1000%) in a matter of only a few trading
days to a few weeks. Google’s share price would have to exceed $60,000.00 to replicate the same price movement (not
possible!).
3.
Penny stock rallies are often independent of overall market movements (bear or bullish) and can be resistant to economic slumps or recessions.
4.
Some of the biggest and best technology can be invested
in before the company’s share price explodes.

Penny stocks are speculative investments. What attracts investors and traders to penny stocks is that a relatively small investment can potentially yield large gains in a short period of
time. However, before jumping into penny stocks, there are
several key differences between micro-cap (penny stocks) and
large-cap (i.e. Google, Apple) stocks.

4

Below are three key differences that every potential investor
must understand before trading penny stocks.

1. Lack of Information Available to the Public: Often the key to
successful investment strategies involves acquiring enough
tangible information to make informed decisions. For some
penny stocks, information can sometimes be difficult to locate. Companies listed on the pink sheets are not required to
file (but may choose to) with the Securities and Exchange
Commission (SEC) and are thus not as publicly scrutinized or
regulated as stocks represented on the New York Stock Exchange and the NASDAQ. Despite a lack of SEC filings, you
will soon find out that penny stock rallies are often fueled by
pure speculation and that these extreme rallies are often not
affected by the lack of SEC filings.

sell the stock (supply is greater than demand). If there is a low
level of liquidity, it may be hard to find a buyer for a particular
stock, which may require lowering your share price until it is
considered attractive to another buyer. Second, low liquidity
levels provide opportunities for some traders to manipulate
stock prices.

2. Lack of Minimum Standards: Stocks listed on the pink
sheets are not required to fulfill minimum standard requirements to remain on the exchange. Stocks listed on the OTCBB
are required to file timely documents with the SEC. Minimum
standards act as a safety cushion for some investors and as a
benchmark for some companies.

3. Liquidity: When stocks lack liquidity two problems may
arise. First, there is the possibility that you won’t be able to
5

C HAPTER 2

Strategies for Buying Penny Stocks at the
Lowest Price

Entering your position (or buying stock) correctly can literally
be the difference between capturing 25% gains on day 1, or 50
to 100% gains on day 1 of a major stock rally. We recommend
attempting to capture gains of 25 to 50% within the first 2 to 5
trading days for each and every penny stock trade.

Buying penny stocks during a super hot active rally will typically require placing your buy order at the ASK price (the realtime lowest price someone is willing to sell the stock for), not
the BID price (the highest price someone is willing to buy the
stock for). Furthermore, many penny stock active rallies are
so popular that in order to secure a position (acquire stock)
you may frequently need to place your buy order 10% or more
above the current ASK price (this is very common practice for
highly active stock rallies when the demand outweighs the supply). During one of these micro-cap mega rallies, in the time it

takes to place your buy order, be received and processed by
your online broker, the current share price may now exceed
your initial buy order, thus requiring you to quickly modify
your buy order by increasing your order price to reflect the current updated price.

We frequently successfully execute an entry position for a
lower price point by setting our initial buy order 10% or more
over the current real-time ASK price, as opposed to placing an
order that requires one or more order modifications. Also,
never place a market order, always specify a specific buy price
(limit order). We recommend not placing an all-or-none
(AON) order. An AON order will only allow your broker to fill
your order if all the shares at your specified price are available. It’s more advantageous to acquire at least some shares at
your initial specified price rather than zero shares.

One more tip, make an effort to buy shares in nice rounded
numbers. For example, it is easier for your broker to fill a buy
order request for 1000 or 1200 or 1500 shares as opposed to
1673 or 1246 or 1872 shares. Your order may be filled faster if
you round your share volume to a nice whole number.

6

C HAPTER 3

Don’t “Chase” Penny Stocks

Don’t “chase” penny stocks in excess of 50% during the buying
frenzy that typically occurs at the opening bell during a superhot penny stock mega rally (the types of stocks that
PennyStockFanatics.com will often alert for FREE to all subscribers). “Chasing” a stock is an attempt to buy a stock that is
rapidly rising in price (because at that moment supply is significantly lower than demand) by placing orders at increasingly higher prices.

will immediately experience a “reset” or “pullback,” which is a
rapid and often brief significant decrease in share price before
the stock eventually climbs northward again.

Figure 1 demonstrates AERN experiencing a super-hot rally
where demand is greater than supply. Buying demand is typically highest during the first 15 minutes of trading, as you can
see by our “chase” annotations. Notice the sharp “pull back”
or decrease in share price that immediately follows the
“chase”. Waiting for this pull back will offer investors a lower
entry point (a better price per share). This pattern is very common and predictable during hot micro-cap stock rallies.

During a mega stock rally it is often more advantageous to
wait on buying a stock until after the first 15 to 30 minutes of
open trading (the opening bell), rather than buying stock that
is rapidly rising or that has risen in share price in excess of
50% within the first 15 minutes after the opening bell (beginning of the trading day). More often than not, a stock that experiences an opening bell “spike” or rapid rise in share price
7

Figure 1.

8

C HAPTER 4

Strategies for Selling Penny Stocks at the
Highest Price

There are three keys to exiting a position (selling your stock)
for the highest possible price:

1.
Always exit your position when the stock price is rising.
Do not wait for the share price to start decreasing before selling. When the share price is rising, buyers are lined up to buy,
which typically allows sellers to sell their shares at the current
ASK price rather than the current BID price. If you wait for
the share price to start decreasing, you will have to get in line
with all the other shareholders who want to exit because of the
current decreasing share price. You will likely at best only be
able to sell your shares for the BID, or more frequently lower
than the current BID price.

2.
The first 5 to 10 minutes following the opening bell can
be the most advantageous time to exit your position (remember, buying interest is often highest during the first 15 minutes of the trading day). This is especially true if the prior
day’s end-of-day trading activities suggested a strong buying
interest. Furthermore, it is common for companies to release
news or PR after hours (after normal trading hours) when
more potential investors are home from work and browsing
their favorite financial news sites. This will typically provoke
strong buying interest in the first 5to 10 minutes following the
opening bell. If you have met your goal of obtaining 25to 50%
gains, we strongly recommend taking advantage of this opening bell momentum and selling to secure profits!

3.
Finally, make every effort to exit your position within 2
to 5 trading days. The faster you secure profits, the less likely
you will find yourself caught in a stock “dip,” “pullback,” or
downturn. Most penny stock super rallies only last 2 to 5 days;
after that a sharp decrease in the share price is often experienced.

Figures 2 and 3 demonstrate typical micro-cap stock super
rally patterns. As you can see in Figure 2, INAR rallies over
800% within just 3 trading days. Afterwards a sharp decline
in share price developed. Figure 3 demonstrates an MDMC
rally topping over 200% within 10 days followed by a similar
steep decline in share price.
9

Remember!!!!! The key to consistently profiting from microcap stock rallies is to buy stock early and sell quickly. At
PennyStockFanatics.com we alert our subscribers for FREE
the very moment one of these penny stock super rallies begins, allowing our members the opportunity to acquire the lowest possible share price.

10

Figure 2.

11

Figure 3.

12

C HAPTER 5

The Trading Dogma

The following provides information on
PennyStockFanatics.com’s micro-cap trading philosophy and
theory.

For all practical purposes, micro-cap (penny stocks) stock rallies should be viewed as short-term price movements (rarely
exceeding 10 days), which will eventually and abruptly end.

During active penny stock rallies, it should be assumed that
most of the PR content released is highly speculative and that
these corporate developments, regardless of how sensational
they may sound, will not result in a long-term upward price
movement.

The truth is that many micro-cap companies are in the business of selling common stock to the general public in order to
fund their operations. They may claim to be the next Google
or claim to have the cure for cancer or claim to have solved the
world’s energy crisis with “magic magnets.” It is never a good
idea to fall in love with any micro-cap...remember, view them
as trading vehicles. These companies want to sell you stock
and want you to hold those shares for long term…not a good
idea.

Never trade more than you can afford to lose. Assume any
trade can result in a sizeable loss.

We strongly recommend trading less than 25 to 50% (33% average) of your trading account balance on any one trade.

Once again, we tend to view most micro-cap stocks as "trading
vehicles," rather than "long-term investments!" We focus on
the brief period of time that these stocks experience super rallies. Our usual goal is to capitalize on these rallies and move
on.

Fundamentals are less relevant during micro-cap stock rallies.
Share price responds mostly to speculation (breaking news)
13

rather than corporate fundamentals. Thus, poor corporate financials, assets, earnings, sales, products/services, and management may not be as negatively influential relative to large
cap stocks.

stock rallies (remember, penny stocks rally on breaking news
or speculation, not on fundamentals or technical analysis).

Your chart skills may not serve you as well with penny stocks;
reserve these skills primarily for large cap stocks.
Seek conservative gains of 25to 50% (33% average) per trade.
Attempting gains in excess of 25to 50% per trade can result in
losses simply due to the high volatility of micro-cap stock rallies.

Many micro-cap stocks alerted by PennyStockFanatics.com
can experience share price movements in excess of 25% to
over 1000% in short periods of time. However, we strongly recommend exiting your position or selling your stock after obtaining 25 to 50% gains rather than holding your position for
excessive gains (you never know when the rally will end).

Remember, in rare cases, the SEC can terminate trading temporarily or even indefinitely at any time, resulting in a 100%
loss of your securities (I have never seen this happen), so
never obligate more than 25 to 50% of your account balance
in one stock trade at any given time.

Once again, we strongly recommend trading less than 25 to
50% of your total trading account balance on any one trade or
stock alert.

Obtaining gains of 25 to 50% can typically be achieved within
the first 2 to 5 days during an active stock rally. Therefore, it is
better to buy during the early states of a stock rally and sell
early, then move on.

Avoid using a market buy order with penny stock trading. A
market order may get you an entry price that is very different
from what you initially expected. So when trading penny
stocks always use a limit order.

Chart-ology, or the study of momentum indicators and technical analysis, is less relevant when pertaining to micro-cap

Don’t engage in after-hours trading (most penny stocks do not
allow after-hours trading). The stock market operates from
14

9:30AM to 4:00PM EST. During the last decade, after-hours
trading was introduced to extend the profit-making opportunities even after the regular trading hours.
The problem with trading after hours is that the liquidity of
the stocks is very thin during these hours.

Never trade with money you need to use to pay your bills.
Don’t trade penny stocks with money you need to live on, just
in case you poorly execute a trade.

15

C HAPTER 6

Avoiding Trading Blunders!

2.
Trading large percentages of your account balance
(greater than 25-50%) on any one trade.

a.
All penny stock traders will execute a trade poorly from
time to time. Penny stocks demonstrate extreme inter-day
volatility. Therefore, in order to minimize large overall trader
account balance setbacks, we recommend only trading up to
25 to 50% of your total account balance on any one trade.

What are the most common mistakes made by penny stock
traders?

3.
Holding your position too long in an attempt to capture
excessive gains.

1.


a.
Our goal is to capture a 25 to 50% gain per trade. This
will typically be accomplished within the first 2 to 5 trading
days. Once you have obtained this goal, we strongly recommend exiting your position and securing your profits.

Buying a stock based on a random penny stock tip.

a.
We do not recommend trading a given penny stock
purely based on a stock tip from a message board, chat room,
forum, friend, or neighbor. One mistake could result in a terminal account balance setback. Leave this work to the experts
at PennyStockFanatics.com or your favorite and trusted
micro-cap analyst. At PennyStockFanatics.com, we are constantly rolling up our sleeves and going to work to ensure that
our subscribers only receive the biggest and best penny stock
alerts in the industry!

4.
Buying into the hype on social media or message boards
regarding a penny stock’s potential.

a.
Social media and message boards are notorious for staging stock scams and providing misleading and deceptive information. We take a strong stance that everything found on a
16

message board is there for one reason, to make the poster
money at the readers’ expense. We see no advantage in visiting any of the popular stock trading message boards or forums.

5.
“Chasing” an entry point greater than 50% from the
stocks’ prior day closing price.

a.
If a stock’s share price rises 50% or more within minutes
after the opening bell, don’t assume that the rapid upward
price movement will continue its current course indefinitely.
There will always be a pullback following a major opening bell
rally (see Figure 1). Wait for this pullback to enter your position, or if the stock price has gained several hundred percent
within a brief period of time (30 minutes to 1 hour), we recommend avoiding that stock entirely (too much volatility for us)!

17

C HAPTER 7

Expectations (Will I Be a Millionaire by
Next Year?)

Will you become a millionaire by trading penny stocks? The
answer is…probably not, but we are confident that you can significantly enhance your annual income if you exercise discipline and follow the basic conservative rules outlined in this
guidebook! Lets take some time to discuss some possible expectations by analyzing several examples…

Here are the rules:
1. My system strongly recommends never trading more than
25 to 50% (33% average) of your total account balance on any
one single trade (just in case something goes wrong).

2. We also strongly recommend taking profits after reaching
gains of 25 to 50% (33% average) on a single trade.

3. For the purpose of these examples, we will assume that our
subscribers will be able to make three trades per month (we
will alert at least two to four stocks per month).

Ex. 1: If one of our subscribers funded an online brokerage
trading account with $3,000.00 and executed three trades per
month with 33% of their account balance per trade and secured profits (sold their stock) after obtaining 33% profit per
trade and reinvested all profits rather than withdrawing funds
from their brokerage account and continued this pattern for
12 months (36 trades), the total account balance would equal:
$128,454.25.

Ex. 2: If one or our subscribers funded an online brokerage
trading account with $6,000.00 and executed three trades per
month with 33% of their account balance per trade and secured profits (sold their stock) after obtaining 33% profit per
trade and reinvested all profits rather than withdrawing funds
from their brokerage account and continued this pattern for
12 months (36 trades), the total account balance would equal:
$258,908.51.

Ex. 3: If one of our subscribers funded an online brokerage
trading account with $12,000.00 and executed three trades
18

per month with 33% of their account balance per trade and secured profits (sold their stock) after obtaining 33% profit per
trade and reinvested all profits rather than withdrawing funds
from their brokerage account and continued this pattern for
12 months (36 trades), the total account balance would equal:
$513,817.02.

Now: Arguments can be made that 36 trades executed based
on the above assumptions may not be realistic. However, we
are assuming that the investor in the above examples is only
obtaining 33% profit per trade (per our recommendations).
The vast majority of our stock alerts will afford investors the
ability to capture 50% to 500% or more in gains per trade (we
still strongly recommend taking profits once 25-50% gains
has be obtained). Furthermore, let’s just say that the investor’s performance after 12 months was only 50% of the total
values from examples 1 to 3. 50% of hundreds of thousands of
dollars is an absolutely fantastic return on investment! These
trades will literally only require roughly 30 minutes total each
to execute, and that’s only about 18 hours of total time investment over the course of 12 months!

19

C HAPTER 8

Getting Started (Choosing a Broker)

executed trade, never trade over 25% of your account balance
on a single order.)

Once your account is funded, become familiar with that broker’s trading tools and platform to ensure a quick execution of
your trade. Remember, once you exit your position (sell your
stock), those particular funds will not be available for trading
for three business days (for example, if you sold your stock on
a Monday, those funds would not become settled and available for trading until Thursday morning).
To get started you will need to open an online non-margin brokerage account. A non-margin account allows you to make an
unlimited number of “day trades” within any given time period. A margin account may limit the number of “day trades”
you can execute in a given time period. Also, you typically cannot purchase stocks listed for under $4.00 per share on margin. We recommend a brokerage firm with considerable consumer approval such as Scott Trade, E-trade, or TD Ameritrade.

We recommend initially funding your account with between
$2,000.00 and $4,000.00 (smaller account balances are also
acceptable). Remember, we highly advise never trading more
than 25% of your entire account balance on any one trade. (In
order to minimize account balance setbacks due to a poorly

20

C HAPTER 9

Disclaimer

All references to “we,” “our,” etc. refer to
PennyStockFanatics.com.
Neither PennyStockFanatics.com nor the owner of
PennyStockFanatics.com- "Michael C. Gunn" (the pen name
used by the Site's author and publisher) is a registered securities broker, dealer, advisor, and is not licensed to give financial advice, buy/sell/hold recommendations, or anything in
the nature of financial and/or investment advice. Data and information are provided for informational and entertainment
purposes only, and are not intended for trading purposes.
NEVER invest based solely on our alerts.
Before viewing any of our pages or subscribing to our website,
all members, visitors, and guests agree and fully understand
that the stock market and all financial forums contain implicit
and explicit risks. That being stated, understood, and agreed
upon, anyone who directly or indirectly uses the services and/

or products shall not hold PennyStockFanatics.com or any of
its affiliates liable to anyone for any loss, injury, or damage resulting from the usage of this website.
All users of PennyStockFanatics.com, whether member or visitor, agree that they alone bear complete responsibility for
their own investment research and investment decisions, and
that they will not hold PennyStockFanatics.com liable for any
decisions or outcomes from actions made by them or others
based directly or indirectly upon the reliance of news, information, research, or any other material published by
PennyStockFanatics.com.
PennyStockFanatics.com is not a licensed broker, securities
dealer, or brokerage house. PennyStockFanatics.com does not
and cannot execute any trades on behalf of investors.
PennyStockFanatics.com is strictly an informational service
and does not recommend any user take any specific action.
All statements and expressions are the sole opinions of the editors and are subject to change without notice.
A profile, description, or other mention of a company in our
newsletter is neither an offer nor solicitation to buy or sell any
securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or
guarantee the accuracy thereof or the statements made
herein.
THE READER SHOULD VERIFY ALL CLAIMS AND DO
THEIR OWN DUE DILIGENCE BEFORE INVESTING IN
21

ANY SECURITIES MENTIONED. INVESTING IN SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF
RISK. THE INFORMATION FOUND IN THIS PROFILE/
SITE IS PROTECTED BY THE COPYRIGHT LAWS OF THE
UNITED STATES AND MAY NOT BE COPIED OR REPRODUCED IN ANY WAY WITHOUT THE EXPRESSED, WRITTEN CONSENT OF THE EDITORS OF
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The information contained within this website is NOT a solicitation to BUY, SELL, or HOLD any securities mentioned. Furthermore, the provided data should not be used as the sole basis for making any investment decision. The individual investor’s own due diligence is of the utmost importance and highly
recommended. Never buy stocks based purely on our alerts.
Investors are always encouraged to consult with their financial advisors, brokers, accountants, or attorneys and conduct
their own due diligence prior to making an investment in any
of our featured companies.
Statements included within this site that are not historical in
nature constitute forward-looking statements for the purposes
of the safe harbor provided by the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that any information on this contains certain such forward-looking statements
that involve substantial risks and uncertainties. When used,
the words “anticipate,” “believe,” “estimate,” “expect,” and
similar expressions as they relate to the company or its management are intended to identify such forward-looking statements. The company’s actual results, performance, or achieve-

ments could differ materially from the results expressed in, or
implied by, these forward-looking statements. Further management discussion of risks and uncertainties can be found in
the company’s quarterly filing with the Securities and Exchange Commission and other periodic filings.
PennyStockFanatics.com does not represent or endorse the accuracy or reliability of any of the information, content, or advertisements (collectively, the “Materials”) contained on, distributed through, or linked, downloaded, or accessed from any
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to make improvements or changes to, or correct any error or
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WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
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The area highlighting the past performance of our alerts provides information to the general public on selected stocks that
have performed successfully. Other stocks profiled that are
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23

C HAPTER 10

Glossary of Common Terms

This is profit that is earned through dividends or the sell of a
security (stock). A capital gain is the difference between the
sell price and the purchase price.
Common Stocks
When investors talk about investing in stocks, they are referring to common stocks. Common stocks are a representation
of ownership within a company.

Bears vs. Bulls
Bull investors expect stock prices to increase, while bear investors expect them to decrease. A bull market is when share
prices are moving upward, while a bear market is moving
downward.
Breakout
This is the point at which the current stock price breaks out of
a former trading range. The breakout can be either below or
above this range.
Broker
A broker is an individual/firm that investors use to execute
trades. All investors need a broker to buy and sell stocks.

Common stocks yield the highest returns, but are considered
higher-risk stocks. If a company decides to file bankruptcy
and liquidates, then investors holding this type of stock get
paid out last. Creditors, bondholders, and preferred shareholders get paid before common shareholders.
Day Trader
A Day Trader buys and sells securities within the same trading
day. This type of strategy is for very active traders.
Fundamental Research
Fundamental Research is the analysis of companies and industries. The analysis consists of assets, earnings, sales,
products/services, management, and markets. Economic factors are also considered in the analysis: interest rates, inventories, savings, and gross national product.
Indexes

Capital Gain

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Stock indices are used as benchmarks to measure the performance of stocks. There are several indices utilized for benchmarking, and each one is unique.
Intraday
Trading stocks during a single trading day.
Margin Account
A margin account is a loan account provided by your broker.
This account allows you to borrow money from your broker to
purchase more stocks.
Market Capitalization
Market capitalization (Market cap) is the total amount of
shares outstanding multiplied by the current stock price,
which equals the total market value. For example, let’s say a
publicly traded company has 10,000 outstanding shares that
are worth $10 each. So, you would multiply 10,000 by $10,
and the total value of the shares would come out to $100,000.
Market Makers
Market Makers (MM) are broker-dealer firms that accept the
risk of holding certain securities in order to offer them to the
public. All market makers compete for customer orders by providing buy/sell quotes for a set amount of shares. Buy and sell
orders are put through by Market Makers. They make their
money on the bid-offer spread.

Market Maker Spread
The Market Maker (MM) spread is the difference between the
buy price (MM purchased at) and the MM sell price of a stock.
This spread is the profit that Market Makers make per transaction.
Market Order
A market order is an order requested by the customer to buy
or sell a stock at the current market value. Customers place
these orders with their brokers, which are then entered in the
system as a market order by the broker.
Merger
A merger is when two companies combine as a single entity.
The success rate of mergers is low, so it is very common for
companies to handle the procedure as discreetly as possible.
Offer Price
The offer price is also known as the sell price (ask) of a particular stock. This is the price that a seller is willing to sell a particular stock at.
Open Order
An investor sets up an open order with his/her broker to purchase or sell a particular stock. Open orders are either set up
as Good till Canceled or cancel out within 30 to 60 days if an
order isn't satisfied.
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OTC Bulletin Board (OTCBB)

Over-Sold

OTCBB is a U.S. electronic quotation system that provides
real-time data for over-the-counter (OTC) equity securities.
Companies trading on the OTC BB system are required to file
their financials with the SEC.

This is the opposite of over-bought. This refers to a stock that
has gone down in value due to a decrease in demand for the
stock; increase in sells. These sells push the stock lower, thus
leaving the stock price at a much lower level.

Outstanding Shares and Float

Penny Stocks

Outstanding Shares: This is the total shares issued by the company. Outstanding shares are held by investors, the public,
company officers, and inside investors that own restricted
shares (shares not issued to the public). Repurchase shares by
the company are not considered outstanding stocks.

Low-priced stocks selling for under $4.00 per share. These
stocks are highly speculative and considered high-risk. Companies on the OTC market are not required to report their financials to the SEC.

Floating Shares: These are shares that are available to the public to purchase. The amount of floating shares can affect a
stock's volatility. If a company has a small float, then any activities could affect the price dramatically. A company that has
a small float tends to have high volatility, because large orders
can have a major impact on the share price: a large sell order
can drive the stock price down; and a large buy order can
move the stock price higher. A company that has a large float
tends to be less volatile, because large buy/sell orders don't affect the supply as much. It's a case of supply and demand.
Over-Bought
This refers to a stock that has gone up in value due to an increase in demand for the stock; increase in buys. These buys
push the stock higher, thus leaving the stock price too high.

Quote
The quote refers to the best bid (buy) to buy and the best sell/
offer (ask) to sell any stock at any time.
Reverse Merger
A reverse merger is when a smaller company acquires a larger
corporation. The small company will benefit by becoming a
publicly traded corporation, and will be able to bypass the up
listing approval process. Most of the time, the publicly traded
corporation that is bought out is known as a "Shell Corporation." This is due to the company having little or no assets.
The smaller company acquires the shell corporation by buying
controlling interest through a new issue of stock. Most of the
time, the smaller company will take the name of the larger corporation.
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Reverse Stock Split
A reverse stock split is when a company decreases the total
amount of shares available by combining the current shares
into fewer shares. For example, if the company executes a 2for-1 reverse stock split, then the company takes two shares of
stock and combines them into one share.
Short Position
This pertains to stock contracts, which are sold short and have
not been covered as of a particular date.
Short Squeeze
A short squeeze is when a company's stock (float) has dried up
and the stock price begins to rise at an accelerated pace. This
is a case of supply and demand. In this case, there is a high demand of stocks but not enough supply, which forces the share
price up.
Spread
The spread is the range between the ask (price) and the bid
(buy) for a particular stock.
Stocks
Stocks are securities that represent ownership in publicly
traded companies and are sold by the share.
Stock Split

A stock split is when a company increases the total amount of
shares available by dividing up current shares. For example, if
the company executes a 2-for-1 split, then shareholders will
get an additional share for every share owned.
Swing Trader
A swing trader is a trader that holds a stock for a day to a few
weeks. Before buying into a stock, a swing trader already has
his/her entry and exit points planned.
Ticker Symbol
A ticker symbol is an abbreviation of the stock name, which is
used to identify individual stocks and the exchanges they are
traded on.
Undervalued Stock
An undervalued stock is a company that is trading below its
potential price; trading at a discounted price.
10Q and 10K Filings


10Q: SEC Form 10Q is a financial report filed quarterly
with the Securities and Exchange Commission (SEC). This is
done by publicly traded companies, except pink sheets. This
report includes unaudited financial data and gives insight into
the company's financial position. This report must be filed
with the SEC for each of the first three fiscal quarters. The
10Q is due within 45 days of the close of the quarter.

27



10K: Every publicly traded company is required to file a
10K with the SEC. This is an annual report that contains everything about the company's business. Annual reports are free
to the public and can be found directly on the company's website. The 10K provides information concerning the company's
operations, finances, opportunities, and risks.

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