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What are rolling stocks, and how do I invest in them?
Some investors choose to invest their money in a certain type of stocks called rolling stocks. Typically penny stocks or micro-cap stocks, rolling stocks are low-priced shares of small companies with limited assets that are typically traded in low volumes. The prices of rolling stocks go up and down in a relatively periodic manner.
The theory behind a rolling stock is to find a stock that has reached a low and is expected, through study, to go back up in price, thus returning a profit. The investor buys the stock when he feels it won't go any lower, then waits for it to go back up, then sells it, buys it again when it falls, sells it again when it goes up, and so on. This is where the term "rolling stock" was termed.
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A stock is determined "rolling" by some through a process of technical analysis methods that use graphical patterns in pricing charts. The studies show stocks that repeat their up/down pattern fairly predictably, so investors feel comfortable buying them.
The rolling stock strategy is generally done with penny and micro-cap stocks. While some people have made a great deal of money with rolling stocks, fraud is also very rampant within the trading of these stocks. If rolling stocks are not researched properly, the investor could end up losing a lot of money.
How Do I Invest In Rolling Stocks?
If you are interested in investing in these types of stocks (keeping in mind that this is a theory), you should keep a number of things in mind in order to avoid being scammed:
- Research! It's important to carefully research the company you're considering purchasing stock from. Microcap stocks, which are often rolling socks, are not sold on the exchange; rather, they are sold Over-the-Counter or are quoted on the OTC bulletin board. For this reason, they are not held liable for certain standards that stocks traded on NASDAQ or others are. As a result, there is often a lack of public information as they are not reported on as frequently as NASDAQ stocks, if ever.
- Avoid gimmicks. When researching rolling stocks, you will most likely come across certain manuals or "tips" online that promise to help you make millions of dollars with little investment. Avoid falling for this; these are often scams that will provide you with outdated, useless information at best.
- Check the SEC's reports. Per federal law, most companies are required to file reports with the SEC, or Security and Exchange Commission. Exceptions to this include very small companies. Once registered, the company and its stocks are made public and the company is required to file a number of reports that contain certain information on the company's financial standing, business, management, and other pertinent information. This information can be very useful, as it tell you the company's financial standings, in helping to determine whether you invest or not in their stocks. If a company is not listed with the SEC, your risk of losing money or being scammed is higher.
While rolling stocks have the potential to make money, it's important to remember that such a theory is based entirely on speculation and not necessarily an accurate prediction of a way a stock will behave - no method can tell you that as the market can change drastically from one day to another. But if you do decide to invest in rolling stocks, make sure you properly research in order to reduce your chances of losing money.
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