You might have read about people becoming millionaires via penny stocks. Yes, it is a perfectly plausible scenario. However, contrary to popular belief, luck has very little to do with it!

In order to gain massive profits from penny stocks, it is vital to put in the necessary work. The more you research about the stock before you zero in on it, the higher would be your chances of picking a winner.

So, what are the things you must research about the penny stock before you decide to buy or sell it? Here’s the checklist as per expert traders.

#1 Fundamental Analysis: Analyzing the fundamentals of a company is important, especially if you plan to hold on to the stock for a while. There are a lot of aspects of the company that is covered in the fundamental analysis.

Reading an annual report is pivotal for understanding the value of the company. With the right guidance, you can learn how to the numbers and ratios show you what is really going on within the company. The balance sheet and income statements give a clear insight into the company.

The important pieces of fundamental analysis are described in the professional penny stock course.

#2 Know what the company does: Before you buy a stake in the company by purchasing its stocks, it is important to understand the business of the company. Warren Buffett is famous for his quote – “I don’t  invest in what I don’t understand.” Even after researching about the company’s business, if it doesn’t make sense, it may be best to avoid that stock.

#3 Competitors: Every company has a competitor. Just like there’s Pepsi for Coke, the company you are interested in may have competitors in its industry. It is important to research where the company stands amongst its competitors and how much market share the company has when compared to the rivals. Remember that every low-cost competitor puts pressure on the company’s margin. So assessing the company’s standing among its peers is a good yardstick to measure the company’s future prospects.

#4 Check for Red Flags: Read through forums and company reports to understand if there are any red flags with respect to the integrity of the company. Check if there is a clear roadmap about the company’s expansion plans. Look for lawsuits and pending cases in the court. Check if the company has a website that is up to date with details about the company history. Verify if the names of the senior managers, their backgrounds, and how long they have been with the company have been listed out.

#5 Advanced Chart & Technical Analysis: Learn Advanced Chart and Technical Analysis for choosing the stocks that are ready for an upcoming upmove or downmove. The professional penny stock trader course covers all the important concepts of technical analysis and chart reading that can help you pick potential penny stock winners.

In addition to all these, it is important to choose the right platform and broker for trading. It is also best to do paper trading for a while and gain necessary experience before venturing into actual trading with real money.