1. Rules on Picking Penny Stocks - Paradigm Capital Management Penny stocks are high risk, high reward stock plays. When buying these high risk stocks you must pick the right stock to buy at the right price. If you pick the wrong stock or you time your purchase poorly you will lose some money, maybe all of your investment. On the other hand with the right stock and the right timing you could make a huge profit on a small investment. This is stock trading and all stock trading is unpredictable, this becomes even more apparent in penny stocks. Even with research you will pick wrong some times, limiting the losses and riding the profits will enable you to be successful and limit your overall risk. 1)Its safer to play the listed penny stocks or the over the counter bulletin board (OTCBB) stocks than the pink sheets. Especially when your just learning. The OTCBB stocks must file with the SEC so there is more information available on the company such as the share structure and financial background. You can also find plenty of low priced stocks trading on the major exchanges such as the nasdaq. 2)Look at a company’s history, watch out for reverse splits, look for a long record of trading without manipulating stock price or operating shares. These companies will be safer. There is a lot of fraud in the penny stock market and looking at a company’s history will help you weed out some of the bad ones. At first avoid "penny stock picks" especially of new companies; just watch the price you could

2. buy at and outcome. They are not usually a good investment, but may be good for quicker trades once you know what you're doing. 3)Find out what makes the company valuable, do they have a lot of land, oil, gas or diamond mines. Are they ripe to be acquired by another company, are they making their own acquisitions. Do they have patents on their products or patents pending? What is their reputation in the field? If you live in their area or know someone in that area, go visit the facilities. 4)What are the negatives of a company, what do they owe, what are their debts and liabilities? If a company you like has too much debt, when that debt is called they may need to sell shares (dump) into the market to raise the capital. Ideally you want a company with no debt for the time frame you wish to own it. 5)Penny stocks in the areas that are running on the major exchanges are usually a good bet, if oil is strong look for oil penny stocks. Same for gold et al. Emerging markets and fast growing industries are also ideal for investment. Stay on top of the market in general take that knowledge to these low priced stocks. Research what will be hot over next few years and then dig through these low priced companies. 6)Decide how much money you will spend/invest on penny stocks. Just a little bit of money, a small percentage of your portfolio and then don't go over your budgeted allotment. Always be safe with your money, don't fall in love with a stock, and don’t risk money you don't want to lose. Often traders will allocate 5- 10% of their portfolio to the riskier stocks.

3. For more information on penny stock investments you can consult with Paradigm Capital Management a Small Cap Company. Paradigm Capital Management has the experts when it comes to Small Cap Investment and they can definitely assist you in achieving your financial goal, contact us at (518) 431-3500 Or visit us here: http://paradigmcapital.com/