Author: Peter Leeds
Publisher: Wiley. 198 pages
Book Review by Ramu Nakliba
On the inside back cover of this book is stated that the online service Peter Leeds Penny Stocks has sold about 35,000 subscriptions, and that it is one of the most popular financial newsletters in the United States.
Penny stocks are typically low-priced stocks priced under $5 a share. They are also very volatile. If a $5 stock If goes down just a dollar for example, this would be extremely risky for the penny stock trader – a loss of 20 percent of the investment. A $10,000 investment would lose $2,000 in just one move.
Peter explains that when a trader loses 20 percent, he would have to gain 25 percent to come back to its original worth. The more the loss, the greater the percentage of gain needed to recoup the loss. If a penny stock goes down 50 percent or $5,000 in this example, the trader would have to gain 100 percent or $5,000 just to get back his loss.
On the other hand, penny stocks are also viewed by some as ‘high-flying’stocks. If a $5 penny stock goes up a dollar, that would be a 20 percent gain, something very difficult to achieve in one trade for a $50 stock for example. The $50 stock would have to go up $10 in a day of trading to achieve a 20 percent gain. It would typically take a $50 stock about a year to gain $10 in price, or at least a month due to some great news such as very high earnings per share in a given quarter, for example.
So while penny stocks are risky due to volatility, they can also be profitable in shorter periods of trading unlike higher priced stocks.
There are several main points Leeds makes at the outset of his book for successful penny stock trading: how to find the highest quality penny stocks, which penny stocks to avoid, how to trade risk-free, the best buying prices and when to take profits.
He also introduces the reader to his Leeds Analysis, a system that “allows you to find penny stocks that are about to jump up in price, and helps you get involved before the rest of the investment world.”
This is a good book on the subject of penny stock trading. Leeds says in summary that to achieve success with penny stocks, investors should look for companies with:
Strong management teams
Good upside potential
Solid financial trends
Buy the book and see for yourself.