When trading top penny stocks there are quite a few important decisions to make but choosing the right broker is one of the most important ones. The broker you choose can directly impact upon your performance and it's important to find one that you really feel comfortable with. Everyone is different and just because a particular trading platform is liked by thousands of other traders, it might not be a good fit for your particular trading style. Fidelity is a well known broker and has been around for a long time. You can get our take on what they offer during this review.

Getting An Account

We are pleased to report that this step was completed with the minimum of fuss. Getting an account only takes a few minutes and requires you to enter a beneficiary and set-up a money transfer method to allow you to make a deposit into your account. One aspect of the account that isn't so favourable is the length of time it actually takes to see the money in your account. It can take up to 6 working days.

Let's Talk Prices

Along with the software, this is one of the most important aspects of a broker that we analyze, since favourable fee structures allow us to make more profit. Fidelity's minimum account balance of $2,500 is on the high side and will probably put off a good number of newer investors, but commission levels are excellent if you get a gold level membership. There are 3 different levels: Gold, Silver and Bronze, and with Gold you only pay a $7.95 commission for each order you make, which is really competitive with other online brokers. Silver level members pay $10.95 per trade, which is still very reasonable, but it starts to get a little expensive with Bronze membership at $19.95 per order.

It happens in every single profession. Things are given special names and expressions are created to define certain situations or relationships. This is no different when it comes to trading top penny stocks. This article contains some of the ones we've used or heard most frequently in the time we've been trading.

The Trend Is Your Friend
Oh boy, we must have heard this one millions of times. It's pretty simple to understand, the message it gives is very clear and has definitely helped us out over the years. It refers to the fact that you are more likely to make a profit if you go with the market rather than against it. So if the general trend of the market is upwards, you should be looking to buy and then sell higher.

Bulls Make Money, Bears Make Money, But Pigs Get Slaughtered
This is an expression that is used to remind you to walk away when you are up and to not get too greedy. You can make money in any type of market conditions but greed often has a habit of setting you up for a (potentially very large) fall.

Cut Your Losses Short
The first part, "Cut your losses" is a saying that is used in all parts of life to be honest but when it comes to stock trading it is more valuable than anywhere else. You won't be able to avoid making a few losses, the trick is to close your position before it gets out of hand. This allows you to preserve your fund so it can be used elsewhere.

Buy The Rumor, Sell The Fact
You are probably already aware that the stock markets don't move on fact alone. Rumors often have a huge impact on stock prices as the market tries to predict the outcome of important events that are expected to happen. Once this event actually occurs though it is the best time to sell as the market has a habit of doing a 360 afterwards.

Having suffered at the hands of a global recession in recent years you have probably heard the "R" mentioned more times than you care to remember. Even now, when the economies of some nations are picking up, hearing that dreaded word is probably enough to send a shiver down your spine. But when it comes to investing in stocks, it's not all doom and gloom. In fact the average return during periods of recession in the last 70 years is only a fraction below the figure for non-recession periods during that time, so people are still making money through stocks even when times are tough. But is there a special way to identify top penny stocks and other picks during recessions? We have put together some of our top tips for you.

Who is Selling Products People Need?

I'm sure you are familiar with the general consequences of a recession; people have less money and as a result they tighten the purse strings. This means cutting back on lavish goods that they can do without. You need to think how this spending pattern will impact upon companies you could potentially invest in. If the public are only buying essential items, only the companies that produce or provide these essential items are going to continue generating the same revenues, whilst other types of company will experience drops in revenue. When a company loses a significant amount of revenue suddenly, it makes the necessary adjustments in order to survive. This means cut backs - usually on things like staff and marketing. It's a vicious cycle because without the same marketing budget it's difficult for them to attract the new clients they need to generate more revenue. In a nut-shell its best to stick with companies that people are going to buy from no matter what.

Spread Your Money Around

This is referred to as diversification. It's always better to have your money spread around in lots of different places rather than having it all stacked up in the same place ("having your fingers in a lot of pies" as the expression goes). But this takes on even more significance during a period of recession as things usually become more unpredictable. It's more difficult to accurately assess the condition of an individual company as there's no way of telling when the market has sunk to the lowest of the low. Buy a lower number of shares in a bigger number of companies.

When trading top penny stocks or any other type of stock there is always a temptation to jump in and open a position that most would consider to be on the reckless side. This is because the stock market tends to draw most people's ego out into the open, exposing the mental or emotional weaknesses of the trader. This can be a dangerous situation to be in if things don't go to plan as you'll end up losing a bigger chunk of your finances than you can realistically afford. But when you are caught up in the moment it is easy to miss the signs that indicate you are risking too much. Or maybe you aren't even sure what they are. Not to worry though as we are going to give you a run through of the most common indicators.

The Most Common Signs That You Are Risking Too Much

• Restless Nights - If you find yourself lying wide awake in bed at 2am thinking about the trade then you are definitely risking too much. When trading stocks, even if they are some of the top cheap stocks around that could make you some serious money, you shouldn't be thinking about them when you're not working. Emotional attachment shouldn't become a factor in your trades. If something is keeping you awake, it's usually a sign that you are troubled by it.


• Investing in a Loser - This is something we see pretty often amongst rookie traders. Let's get one thing straight, it is almost NEVER a good idea to invest more money into a stock that has already lost you money, just to try and recover the money that's already been lost. Two wrongs usually don't produce a right and if you find yourself in this situation it's time to walk away.

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Given that the stock market is directly affected by the state of a country's economy, many American investors have been eyeing up stocks on foreign soil in recent years. Whilst the American economy has faltered, other countries - namely China, India, Russia and Brazil - have been enjoying a boom period. But how exactly do you go about investing in foreign stocks, is there anything you need to watch out for and can you buy top penny stocks from foreign countries? Well, those are all good questions - let's try and answer them.

How Do You Invest In Foreign Stocks?

This used to cause the average individual investor a lot of headaches. In fact it used to be very expensive and a lot more complicated than buying domestic stocks, which automatically ruled a large proportion of individual investors out. However, fear not as the internet has changed all of that. Through online brokers, as used by millions of investors and traders worldwide nowadays, you have access to stock markets that you've probably not even heard of. Of course not every single broker will provide you with these possibilities - but there are now enough of them out there to give you a choice of many different services. It's all about finding the one that suits you best. So there you have it, you are just a few mouse clicks away from investing in stocks of companies that are located on a different continent.

Paper trading is a term commonly used by stock traders. But what is it? Well, every step of the trading process is carried out exactly the same as with a normal trade, but no money actually changes hands. Rather than purchasing the stock with your own money, you write down on paper or make use of a software program (many brokers have programs now that allow you to paper trade) to simulate the experience and monitor the results.

It's not that uncommon for people to make use of simulators to gain experience and test out their skills. The military services in many countries make use of simulators as part of their training program and athletes now commonly make use of simulators to enhance performance. Why? Although the settings may be slightly different, all simulators are used for the same reason; to get lifelike experience without exposing the user to the same level of risk.

As mentioned, paper trading stocks can be as simple as writing down your buy order in a notebook, monitoring the stock's movements and then writing down the price you sell for. It is important to follow these steps accurately, as the experience needs to be as close to reality as possible if it's going to be of any use. Carry out all the same actions as you would with a "real" trade. First, identify stocks of interest. Second, do some in-depth research on these stocks - take a look at each company's fundamentals and make use of technical indicators to try and predict future price movements of the stock. Once you've done this, if the stock looks like its got potential to make some money, come up with a trading plan (including an entry and exit strategy for the trade). Once you have a plan in place just play out the trade and monitor your results. It's as simple as that.

The majority of people now paper trade using online brokers and the experience is practically the same as if you were really buying the stocks from them. If you are going to use an online broker to make your real trades, paper trading also provides you with a good opportunity to get used to their trading platform.

In order to find top penny stocks it is essential that you knuckle down and do some research. You need to find out what state the penny stock company is in before you buy into it. You wouldn't go out and buy a car without first checking what state it's in, right? Well the same goes for a penny stock company - you need to avoid all the rusty old bangers (companies without a future) and find one that's in decent shape and looks like financially it still has some miles left in it.

Financial statements are always a great place to start. They offer you the chance to look at some cold hard facts. You can find out whether the company is making money or losing money, if the company has any assets or whether it owes creditors, and whether the company has progressed year-on-year. Of course, if the company has a good financial standing right now, that doesn't automatically mean this won't change in the future. There are so many things that could potentially impact upon the company's success at a later date, but checking out the current financial health of the company provides you with a good platform from which you can dig a little deeper and make an informed investment decision.

Penny Stock Companies with Debt

Generally speaking any company that carries a significant amount of debt wouldn't be classed as a company that is a good investment. However, with penny stock companies there are sometimes exceptions to this rule. Some of the top penny stocks to watch are actually companies that are carrying debt. This is because they are at an early stage of their development and are trying to grow. In order to grow, it is often necessary for these companies to take on debt in order to fund research, marketing and development of their products or services. This further demonstrates why you can never buy into penny stock-based on this data alone.

Following on from our original article in the series, we are going to continue comparing penny stocks to their blue chip counterparts. We are sure you have established by now that there are quite a few differences between the top penny stocks and the top blue chip stocks - and not just in terms of price.

Spread

The spread is the difference between what price a buyer is willing to buy at and what price a seller is willing to sell at. As penny stocks are traded in significantly lower volumes than blue chip stocks you will often come across bigger spreads. This does mean that your orders might not be executed quickly or you may have to buy/sell at a slightly different price than you initially wanted. Blue chip stocks on the other hand are traded in vast amounts every single day and as a result of this the spread is very low meaning your order can be executed almost instantly.

The Risk/Reward Ratio

You've probably already heard that penny stocks are high risk, high reward. You can potentially make an awful lot of money if you indentify the top penny stocks of 2012. However you also have to be prepared for the fact that you could possibly lose that investment too. Blue chip stocks are practically the total opposite. You aren't really risking an awful lot as you are buying shares in established companies that aren't going to disappear overnight. However the trade off is that they offer a far lower potential return.

Do you know the difference between penny stocks and blue chip stocks? Do the top penny stocks have any advantages over blue chip stocks? These are pretty common questions and ones that we frequently find in the PennyRiches.com mailbox.

Penny Stocks: The Definition

Penny stocks are usually stocks in smaller, up and coming companies that have no proven track record of success. You can usually buy them for just a few dollars per share (the generally accepted limit for a penny stock is $5 per share). You won't find them trading on the major stock exchanges as they don't usually meet the requirements for a listing and are commonly traded on the pink sheets or OTCBB.

Blue Chip Stocks: The Definition

In contrast these are stocks in huge companies that have seen good and bad times come and go.  They are listed on the major stock exchanges and you can expect to pay a fair whack per share compared to penny stocks.

The Analyst's Opinion

Analysts tend to suggest you should stay away from penny stocks due to the relatively low volume that's traded each day, the lack of history these companies possess and the low prices they trade for. But this is exactly why you can make a fortune on these stocks - you can potentially purchase an extremely rewarding stock for a very small financial outlay.

Speculation

In many ways these two types of stocks are entirely opposite. Penny stocks are often highly speculative, due to the fact that in a lot of cases they have very little information for you to go on. On the other hand blue chip companies often have little to no speculative value as they are well publicized and you can find out just about anything you want.

If you have any previous experience of trading stocks, you'll know that in order to uncover the top penny stocks to invest in, you will need to perform some sort of analysis. There are so many analytical techniques that can be used during this process but they can be divided into two broad categories; technical analysis and fundamental analysis. Fundamental analysis is where a trader will put the company and its products or services under the microscope to try and determine whether it has a bright future ahead of it, whilst technical analysis uses statistical data to try and predict a stock's price movements in the short term. During this article we are going to provide you with a quick overview of the different chart types you can expect to encounter when carrying out different methods of technical analysis.

Bar Charts

Bar charts are extremely common and display several pieces of information to the trader. As the title suggests, vertical bars are plotted onto the chart. You will find time on the X axis with price on the Y axis. The top of the vertical bar shows the highest trading price for the stock in the selected time period, whilst the bottom of the bar represents the lowest. The open and close price is also viewable on bar charts, shown by small dashes made on the side of the bar. You will also notice that on a majority of bar charts you look at, the vertical bars will be colored either black or red. Red means that the stock's price has taken a tumble within the time scale of the chart, whilst a black colored bar indicates the stock's value has increased.

Candlestick Charts

At first glance you might not see much difference between a candlestick chart and a bar chart. They are indeed very similar, with the only real variance being the way in which the difference between the stock's opening and closing prices are represented. Rather than dashes, a thick bar is formed on the candlestick to represent this difference. In the event that a stock's price drops between the open and the close, the candle will be colored a specific color (different colors are used depending on the chart provider) and the bottom of the thick bar will represent the closing price. When price increases this will be reversed, with the top representing the closing price.