We have all heard the success stories...

of growing ones fortune through the stock market. Picking the right
Penny Stock at the right time and having it go up a huge percentage.
Have you ever wondered how the stock market works?
How does a person go from rags to riches, or riches to rags buying and
selling Penny Stocks? Is there a secret, or are people just lucky? As you
read this paper you will hopefully gain a better understanding of the basic
principals of buying Penny Stocks as a way to increase or safeguard your
wealth. Let me just start by saying that there are no guarantees when
investing in the stock market.
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WHAT IS A STOCK?
A stock is type of security that rep-
resents ownership in a corporation.
Corporations issue stocks to raise
money and grow their businesses.
There are two types of stock in a
corporation: common and preferred.
Common stock typically carries voting rights that can be exercised in
corporate decisions.
Preferred stock differs from common stock in that it typically does not carry
voting rights. It is, however legally entitled to receive a certain level of dividend
payments before any dividends can be issued to other shareholders.
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WHY OWN A STOCK?
Over the years purchasing company stock has been
a great way to increase ones wealth. If a company
nakes a proft, or grows its earnings over tine, you
as a s|are|older would generally s|are in and oeneft
fron t|e conpany's proft. T|e result nay oe t|at your
stock price goes up. The same holds true in reverse,
however, and if the company loses money, the value of
its s|ares would decrease. Hopefully t|e frst will |old
true for your stock purchase
THE EXCHANGES
When one buys or sells a stock, it is generally done on an exchange.
There are numerous exchanges stock exchanges, both domestic and
international. The domestic exchanges are the New York Stock Exchange
(NYSE), The NASDAQ (NASDAQ), The American Stock Exchange (AMEX)
and then there is the OTC (Over the Counter).
For todays purposes we will be discussing the (OTC) Over The Counter.
The OTC stocks may not meet the general requirements to be listed on
some of the bigger exchanges such as the NYSE or AMEX. HOWEVER, YOU
SHOULD BE AWARE THAT MANY SMALL, DESERVING, COMPLETELY
LEGITIMATE COMPANIES ISSUE STOCK THAT TRADE ON THE OTC.
These stocks usually referred to as Penny Stocks.
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WHAT IS THE OTC?
ln CTC stock is a securitytraded in
sone context ot|er t|anon a "for-
nal exc|ange" suc| as t|e NYSE,
TSX, lMEX, etc. T|e p|rase "over
t|ecounter" can oe used to refer
to stocks t|at trade via a dealer
network as opposed to on a cen-
tralized exchange (LIKE THE NEW
YORK STOCK EXCHANGE).
n general, t|e reason for w|ic| astockis traded "overt|ecounter" isusu-
ally oecause t|e conpany is snall, naking it unaoleto neet exc|angelisting
requirenents. llso known as "unlisted stock", t|ese securities are traded oy
broker-dealers who negotiate directly with one another over computer net-
works and oy p|one. llt|oug| Nasdaqoperates as a dealer network,Nasdaq
stocks are generally not classifed as CTC oecause t|e Nasdaq is consid-
ered a "stock exc|ange". ls suc|,CTC stocks are generally unlisted stocks,
which trade either on Over the Counter Bulletin Board (OTCBB) or on the Pink
S|eets. T|is aut|or avoids any conpany t|at trades via "Pink S|eets" stocks
because the Pink Sheets stocks are different from the Bulletin Board stocks.
Companies that are traded via Pink Sheets are not required to meet reporting
nininun requirenents or fle wit| t|e SEC (Securities Exc|ange Connis-
sion). For these reasons the SEC views companies listed on Pink Sheets as
"anong t|e nost risky investnents" and advises potential investors to |eav-
ily research these companies before they plan to invest.
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ALWAYS DO YOUR RESEARCH!
T|ere are nany sources to fnd out infornation aoout w|et|er t|e Bulletin
Board "penny stock" you |ave c|osen is a wise investnent. Talk to your
broker, get the companys prospectus, ask for the periodic companys re-
ports and check on the web for any positive or negative articles concerning
your penny stock. Also, it is important to see if any complaints have been
fled wit| t|e SEC|ttp.//www.sec.gov/investor/puos/edgarguide.|tn
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WHAT IS A PENNY STOCK?
W|at is a penny stock? T|ere is really no set defnition for w|at a penny
stock is? Sone people defne a penny stocks as a stock price under one
dollar, sone under fve dollars. T|is aut|or defnes a penny stock as a stock
under $5.00.
BID, ASK AND SPREAD:
W|en ouying or selling a "penny Stock" t|ere is always a oid, ask and spread.
T|e "Bid" is |ow nuc| soneone is willing to pay for a stock, or t|e price in
which you could possibly sell your stock for.
T|e "lsk" is |ow nuc| soneone is willing to sell t|e s|ares for, or |ow
much one will have to pay to own the stock.
T|e "Spread" is t|e difference oetween t|e oid and ask.
For example, lets say you want to buy a car and you want to spend $10,000
and dealership wants to purchase the car for $15,000. The $15,000 is the
ask, 10,000 is the bid, The difference between the $10,000 and the $15,000
is the spread. Remember it is ok to try and buy or sell your stocks in the
spread. Unfortunately you run the risk of not selling or buying your penny
stock.
WHY ARE PENNY STOCKS APPEALING?
The reason is simple!!! Penny stocks can have MASSIVE, QUICK AND STUN-
NING GAINS!!! You can purchase a greater amount of shares for a smaller
investment. Penny stocks can be purchased through any online broker or
through your investment advisor.
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BE SMART!
The true, penny player, will set a tar-
get and never look back! I suggest
you do the same. Either you limit your
loss by setting an exit price on what
you are willing to lose, or set a goal on
|ow nuc| you want to proft. Penen-
ber nobody ever got upset for making
a proft or liniting losses! llso, never put your eggs in one oasket. Figure
out how much money you want to invest and only invest a portion of that
money into a single stock.
PENNY WISE.
Now wit| t|at out of t|e way, frst identify t|e conpany you are interested
in. Make sure that the stock has not run up 90% in a short time, odds are
you may have missed your window of opportunity or the upside could be
very linited if t|at |as |appened. Lets nake sure your stocks ft t|e fol-
lowing criteria:
Does your prospective conpany of interest |ave a product or service
that the market will need?
Can t|is conpany oecone a narket leader?
lre t|ere any ot|er crediole players in t|e narket space?
s t|e conpany well fnanced?
Does t|e conpany |ave a "crediole" nanagenent tean?
If you answered yes to all above the above questions, you could have
a better chance of providing successful returns rather than unlimited
losses.
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MORE WORK TO BE DONE!!!
After you purchased your stock, always check with the company on
an ongoing oasis. Call t|en, reanalyze t|en, follow t|e conpany's f-
nancial reporting and press releases. Call the investors relations de-
partment. As the company grows, so should the share price of the
companys stock. Finally, make sure that the trading volume increases
daily. This tells you someone is trading your stock and if something
goes wrong, it can be liquidated. You want higher volumes so you know
someone will buy your shares if you decide to sell.
TAKE PROFITS OR A LOSS:
If your stock is up always take your initial investment off the table and
let the balance ride to your set goals. If you are down from your pur-
chase remember your goals and stick to your exit plan. Never invest
what you cant afford to lose.
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2012 Max Sound Corporation
SUMMARY
With a basic understanding of penny stocks and sticking to an exit
strategy you will proft fron w|at you learned today. Below is w|at
would like you take away from this educational piece.
f you can't afford to lose your investnent, your strategy for liniting
your losses should be dont invest at all.
Cverall, t|e very oest way to linit losses is never purc|ase any stock
until you feel absolutely comfortable with it. Know why you are in-
vesting in a company. Understand where you expect the share price
to reach, why the company is going to do well. Know at what point
you want to take your profts. Take full responsioility for w|atever
|appens and oe confdent and confortaole wit| your decision.
lvoid enotional stress. Don't fall in love wit| a conpany, it's |ust
ousiness! f you fnd yourself losing sleep, t|is penny stock invest-
ment NOT for you.
Buy strong, fundanentally solid penny stocks.
Diversifcation is a great way to linit your losses. Do NCT put all
your eggs in one basket. Dont put all your money into one penny
stock!
Use stop losses. T|is prevents furt|er downside on a loss.
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Look for penny stocks wit| good trading volune. T|is will |elp you
limit your losses, since you can liquidate your
position easily and quickly if required. Good trading volume also dem-
onstrates that the company is more widely followed,
and therefore more likely to have strong investor interest.
Take sone proft off t|e taole over tine. f your stock douoles in price
then take original investment back.
Trade on t|e oetter narkets for your penny stocks. Like t|e
OTC-BB (Over the Counter Bulletin Board). Avoid Pink Sheet Stocks.
leep accurate records of your Penny Stock transactions. Consult
your tax advisor if you have any questions concerning gains or losses
as a result of your stock purchase.
SPONSORED BY TICKER: MAXD
www.maxsound.com
2012 Max Sound Corporation
MORE INFORMATION:
Defnition of a Penny Stock
http://en.wikipedia.org/wiki/Penny_stock
For more information about the OTC you can visit the website at:
http://www.otcbb.com/
For more information on the OTC rules goto:
http://www.otcbb.com/issuerinformation/issuerinfo.stm
Defnitions of CTC.
ntt.//en.w|k|eo|a.or/w|k|/Cvertnecounter(fnance)
Defnitions of CTC and Pink S|eets.
http://en.wikipedia.org/wiki/OTC_Markets_Group
What is the SEC?
http://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission
To contact the SEC:
http://www.sec.gov/
History of The Stock Exchange:
http://en.wikipedia.org/wiki/Stock_exchange
DISCLAIMER:
"Fron Pennies To Proft" is a owned puolication of t|e Solct Network. T|e opinions expressed aoout Penny stocks and t|e Stock Market in t|is docunent
is purely the result of research conducted by our staff and are not offers or solicitations to buy or sell the securities mentioned. The trading of securities
nay not oe suitaole for all potential users of "Fron Pennies To Proft". You s|ould oe aware of t|e risks in|erent in t|e stock narket. Past perfornance does
not guarantee or inply future success. You cannot assune t|at profts or gains will oe realized or t|at any strategy discussed in t|is docunent will lead to
wealt| or proft.
lll contents "Fron Pennies To Proft", are provided for infornation purposes only. You agree t|at opinions of "Fron Pennies To Proft" s|ould NCT oe
interpreted as investment advice, or as an endorsement of any security, or as an offer to buy or sell any security. We are not a registered broker dealer, or
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sone or all of any investnent nade. We reconnend t|at you consult a stockoroker or fnancial advisor oefore ouying or selling securities, or naking any
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www.maxsound.com
2012 Max Sound Corporation