Confessions of a Penny Stock Trader

Tim Bourquin Co-Founder, The Traders Expo and The Futures & Forex Expo

Ed Balch has been trading micro-cap, penny, and pink sheet stocks for several years now. He buys hundreds of thousands of shares at fractions of a penny each, and waits for them to move. It is a type of trading fraught with cautionary tales, which Ed freely admits. The stocks are highly manipulated, yet you can buy many shares at low cost.

In this interview, Ed talks about trading this type of stock and where he gets his information. He also talks about managing risk when trading these volatile issues, and explains things every trader must know before trading a penny stock.

Ed is not associated with any of the penny stocks he trades. This interview is an objective look at a unique type of trading.

Play in Windows Media format

Play in RealPlayer format
Play mp3 stream

Direct link to mp3 file

Tim Bourquin: Hello everybody, and thanks for joining me for another interview this week. My guest today is Ed Balch, and we're talking to him about trading penny stocks.

We haven't had a lot of interviews about micro-caps and trading those. So I wanted to get Ed on the phone and talk about his strategies for finding good opportunities there. So, first off, Ed, thanks very much for joining me on Skype today.

Ed Balch: Well, Tim, thanks for having me. And actually, I didn't start with micro-caps, I started with the big board stocks.

I was a big computer guy, so my, naturally my first investment was within the tech sector. It was Netscape Communications, one of the first Internet web browser companies, and that carried on into a fascination with micro-cap stocks.

Tim Bourquin: All right. When I first hear about trading micro-caps, you think of lots of manipulation, fake companies out there. I mean it sounds great to trade tiny stocks. I mean I'd love buy something at $0.15 and sell it for $0.50 because I can buy a ton of shares and do that.

But then part of me says, does the technical analysis work? Because there are...some of these things don't have a lot of volume. I mean, do you have to be careful trading these things differently than you do regular stocks?

Ed Balch: You've got to be very careful with micro-caps, and especially the ones that I primarily deal with.

I like to trade within the .00 range, which is a fraction of a penny, so there is an extreme amount of volatility there. But as we know, volatility can lead to impressive profits or very negative gain.

So, it's something that I enjoy the rush that I get. And I, like you said, I can put in a few hundred bucks and get a few million shares, if I'm trading stocks here in the .0001 price per share range.

Now, the one misconception that people new to the penny stock realm have is that they assume that something is cheap just because they can buy a large quantity of shares, and that's not the case. So as far as my due diligence process, obviously the first step are the stock forums. And, as you just mentioned, there is an abundance of manipulation out there.

So, first step of the process is looking at the forums, finding within the forums and social media which stocks are currently buzzing, as we would say. So whatever interest they may have, that could be a positive interest, negative interest, I take that as my first step.

After that, it's looking through those that are talked about, that are currently being talked about very heavily within the forums and looking at the volume. Because as we know, a stock, whether it's a penny stock or a big board stock, without volume there will be no positive or negative movements as far as price per share is concerned.

|pagebreak| Tim Bourquin: Now, when you're on these forums, I would imagine that 99% of people that are posting about these things have some vested interest. Am I wrong there? I mean, are these the promoters doing that and these guys are, they are already owning a million shares and they're trying to bump it up? I mean, how do you get around that?

Ed Balch: That's a great point. Actually, most of the people in the forums, they do have hidden agendas. You've got the people that are trying to pump and they've loaded up on shares pre-pump.

So they may have purchased an abundance of shares at a lower price per share point and then they start their pump. That pump could be a newsletter, that pump could be a Web site, it could be an e-mail that they send out to people that feel special because they're on that e-mail.

So then inevitably, those people, or all of those sources of promoting the stock combined are going to create a flood of buying interest. As soon as those buys start to come in, the price per share goes up, the people behind the pump usually quickly exit before the people that bought in because of that seemingly positive news are able to exit. So those people are often left holding the bag, meaning they've got worthless shares at that point, or next to worthless shares.

Tim Bourquin: Right, so are, and I guess it's OK if you're in and they pump it and you benefit from that.

But I think most people find that they are in too late. Like they're hearing about this after the fact that it has already been pumped up. The guys are already unloading as they're buying in. How do you kind of avoid that problem?

Ed Balch: Well the way that I avoid it, and I've found has been most successful for myself, is that I like to get in as soon as—even if it's a stock that I feel is being pumped—I like to get in as soon as the volume really catches on.

And I'll ride it out. I typically don't try to go for very large gains, because the majority of the time holding and expecting those large gains is going to minimize the amount of profit that could be made. Because more than likely they're going to tank super rapidly.

And as we know with these micro-caps, what sets them aside from the big boards is that often the market makers on the bid side of the fence, their bid size is so small that the people with the larger positions put in a large sale order bid and it's going to tank so quickly.

And you got to think of it that way. I mean, there are so many other people online to get out, to exit their positions, and so many other people online that may have been part of a pump that already had their limit orders in. So they may, their orders may fill more quickly than yours if you're trying to exit.

Tim Bourquin: Right. So do you find that even as the volume picks up, do you find any trouble? I don't think anybody ever has any trouble getting into these things, but it seems like they might have trouble getting out. I mean, do you have trouble getting out? Do you have to get out in phases, or how does that work?

Ed Balch: Well, there is. It depends on the stock in question. I'm holding the bag of a lot of no-bid stocks right now. They're micro-caps, so they're .0001 on the ask and nothing on the bid. There aren't any market makers on the bid side of the fence.

But typically, getting out is not too difficult. I mean, obviously you need to use tools such as Level II. I pay very close attention to the Level II Last Sale information to see where a stock might be headed. Because if I'm starting to see a lot of orders fill at the bid price, that's a pretty good sign that both the ask and the bid is likely about to downtick soon. And then when I start to see that is when I usually exit.

Now there are certain times of the day where we might see a pullback and then a surge of buying. I know the lunch hour is typically a very volatile time frame, and then likewise the last hour of the trading day, it seems, there seems to be a lot of volatility there.

So a lot of these micro-caps, I start to see massive accumulation about an hour before the market closes. That's a good signal for me personally that the next morning is probably going to be, out the door there, is probably going to be a lot of volume at the ask.

Tim Bourquin: So when you're going through these message boards, I mean, do you typically have a basket of these penny stocks that you're following and maybe getting in and out of each day? Or do you see a new symbol, XYZ Corp, and you think, "looks interesting, I'll get in."

So you don't even know what the company does or anything, which is what most daytraders are doing anyway. So I guess the question is, will you trade anything, or do you have a basket you like to trade in and out of?

Ed Balch: I will trade anything. Now, starting out with micro-caps, I made the mistake of—because they were so cheap price per share—that I went with too many stocks, too many micro-cap stocks simultaneously. So I couldn't really focus on each individual ticker like I should to be able to know when to exit, when to add more, etc. So that was the first mistake I did.

But as far as what I get in and get out, typically I like to have three or four stocks on hand at any time, and for those stocks I'd watch the forums very closely. I watch the financial releases on, press releases on I try to keep very current with everything that's going on day-to-day.

Now, most of these positions I get in, I'm not as active of a daytrader from the perspective that I'm watching the market constantly. I watch, I flip on my Level II throughout the day, but I'm not like most traders where I'm sitting there and just going back and buying and selling constantly. I like to hold on to stuff for at least a few hours or a few days. So at any given time, I may have three or four stocks in my bag.
|pagebreak| Tim Bourquin: All right. And you mentioned the couple of hundred dollar mark, is that the typical size you'll get into on one of these things?

Ed Balch: Typically. It depends. I mean, there have been some where I went in as big as—and for a micro-cap, I feel that this is pretty big—there are some that I've been in as big as like $2,500 or so. But those, in my mind, I refer to as the .00 price range in speculative investment micro-caps.

I don't think anyone should consider a micro-cap an investment. They should always consider it a trade. I did well in one of those, did not do so well in the other.

Tim Bourquin: All right. So you're hoping that these go up, obviously. I'd imagine you can't find shares to short of these pink-sheet stocks, right? So you, it's a long call almost every time.

Ed Balch: Actually, I've never shorted. I've never shorted a stock.

Tim Bourquin: OK. Well, I have to ask then, you know: with such manipulation, with the risk that it could go to zero and that you just simply can't unload it, why micro stocks? What is it about these that even with all the manipulation and the nonsense that goes on that you find it a good area for profit?

Ed Balch: Well, I find it a good area for profit because for a few thousand bucks here and there, there is a really good probability that at least one of those is probably going to at least double. And you don't see that in the big boards. I mean, at times you do, but it's not as common as in the micro-cap realm.

So it's just the level of excitement, and it's...I do it more for the excitement and the detective work. One of my favorite things to do after hours is get on stock forums, Google, other sources for stock information online and research, because it's feeling like a detective that makes it entertaining.

To me stocks, in particular micro-cap stocks, are a game, because you go in and in this realm you're always saying, you're guilty until proven innocent. And that's the approach that that I take with these micro-caps.

Tim Bourquin: I mean even, of course, the press releases are written by companies who have been paid in stock to write them and that sort of thing. I mean, are there any micro-caps out there that just are legitimate businesses that just happen to have micro-pricing on their stocks, or is it all just a huge shadow that this is going to come crashing down if you hold on to these things for too long?

Ed Balch: Well, I think there are some that are legitimate at least at one point in the process, and then they start to drink the Kool-Aid and they want some of it too. So usually even the seemingly legitimate micro-caps, they go south, there are a lot of them that I'm aware of that have done that.

Now, a good point you brought up: press releases. The funniest thing about those when referring to micro-caps is that most of those, they all contain forward-looking statements. So those statements, almost every statement that I've seen within a press release for a micro-cap company, the forward-looking verbiage can invalidate everything. So the company is not lying. They hope to do this, they expect to do this, they plan to, they plan to start this store.

Tim Bourquin: Oh, I'm sure they all have grand plans.

Ed Balch: Yeah, they do. But see, that's the funny part, because most of them never materialize and sometimes they do.

I'll give you a good example, I won't mention the particular ticker symbol, but this was a micro-cap stock trading in the .000 price per share range and they were going to launch an online store. And they got this revolutionary product, they had to deal with Apple (AAPL). It was a solar pack for an iPhone.

I mean, why would this not sell? It sounded so good, and they even had the stamp of approval from Apple; some sort of mark that they give their hardware manufacturers. So that was verifiable; they really did. And they were going to launch an online store and this product is going to be available on X date, so that's a good PR prompt there where they give you a date that you can reference and that helps encourage people to load up on the stock.

The store launched, the store had products available, but I don't think anyone ever bought them. And the thing about it was is that it was such a pump—as soon as the store launched, the stock price plummeted.

Tim Bourquin: So probably the only visitors to the store were the owners or the shareholders just checking to see if the store was live.

Ed Balch: Right. So they got, they delivered what they said they were going to do. They had a store and they had these products available. But—and this is a good example of due diligence as well, because really tearing into those photos once they became available on this online store, you could see...

I've got a really bright monitor, I've got an Apple computer, so I could see in detail that—maybe another monitor and I might not be able to see it—I saw a logo on this device that they were selling as their own brand. And this logo wasn't their brand. I got out on Google and searched for this brand and sure enough, it was another manufacturer, posted that in the forum.

This is another good thing, you know, about micro-caps. I posted that discovery in the forum and then suddenly that logo, that picture of their product on their official store, that little logo in the bottom of the picture was removed. So they were reading the forum.

So never assume when you're trading micro-caps, a lot of these very positive sounding blurbs within a forum. It may be that often the company itself is trying to feed upon the emotions of the forum reader. They want to appeal to what the forum people are concerned about. So there is speculation from that perspective.
|pagebreak| Tim Bourquin: You know, sometimes you think if they just put all the work they put into trying to pump their stock up into a real product, they might actually have a successful business.

Ed Balch: Yeah, no joke. I mean, definitely.

Tim Bourquin: So, I guess, penny stocks get a bad name for all of these reasons, but it sounds like you acknowledge, yeah, these are all exactly what happens. And yet knowing this, you go in knowing that it's information, and then you can make money.

I guess the trouble starts when somebody really believes—or drinks the Kool-Aid, as you say—believes the hype and then keeps buying and hopes that these companies actually come out. If you take it to heart that this is never going to happen, this is a complete crap shoot, this is money I can afford to lose, but, what the heck, I might as well try. Then what's wrong, right? Then it's worth doing.

Ed Balch: That's the perfect mentality. That's, in my opinion, the only mentality to have if you are going to trade micro-caps.

Tim Bourquin: And are there specific industries. I know solar has had their share of micro-caps. Are there specific industries and technology that just seem to get their, more than their fair share of these types of stocks?

Ed Balch: I wouldn't say technology. The technology one hasn't been as big recently, but I've seen a lot of energy drinks; those sorts of things.

Tim Bourquin: I see.

Ed Balch: So just, not to name any companies in particular, but energy drinks and then they pump them up, they're going to be on the retail store shelf.

And sometimes those fly pretty well. I mean if it's in a large national retail chain, they can, they usually pump up price per share very quickly and then they typically tank, but...

Tim Bourquin: So when you're researching penny stocks, I guess if you were researching regular companies for an investment or a trade, you might look into their earnings per share and the real products and just researching the company in general.

Whereas in the penny stock trading business, you are researching what the hype is, and who is talking about it, and kind of that's where your focus is. Is that about right?

Ed Balch: Exactly, especially the ones that are a fraction of the penny price per share, because those you are going to see the most extreme amount of volatility...and it's all hype.

But if you are going above a penny a share, there are some micro-cap investments that can be found. And to find those, typically what I do: share structure, as we are all aware, there are several components of share structure that are important—the authorized shares, the shares outstanding, and the float.

Now, if the authorized shares is several billion, I typically don't give them a second glance if it's over a penny or so per share. But if it's only a few hundred thousand, a few million authorized shares, and then the shares outstanding is very insignificant, those are ones if they have a verifiable product or service.

I do my research and look at all their board on LinkedIn, Google, etc—just kind of get a feel for what businesses management was involved with previously. Maybe they were involved with a bunch of companies with excellent track record. Maybe they were pump and dump after pump and dump. I mean you got to really dig in, but there are some investments to be found that are in the micro-cap realm.

Tim Bourquin: And could you use almost any broker, online broker to buy these? Or have you found that some shares you just aren't able to buy because they are not listed, or their broker doesn't have access for some reason?

Ed Balch: Well, some shares, they put what's called a stop sign on them, as you are aware, so they can't be traded through any broker. There are some micro-caps that you might be able to trade through one broker but not another.

Personally, I use three brokers. I use Fidelity and Ameritrade, also Zecco. I used to use Scottrade in the past, but they weren't very penny stock-friendly. So at times, if I am dealing with especially pink sheets, which are the lowest tier of the OTC markets, often with those I'll have to call a broker on the phone to place a trade. Because some of them they'll restrict to phone-only order, but some of them you just can't trade in at all.

A good example, I had a stock and it actually had a bid. It had a bid of .0001, but I still couldn't sell it because they didn't even allow trades of it. And I tried to transfer my position of that from Ameritrade to Zecco and they wouldn't even allow a transfer of shares that I owned. So it's possible to get stuck with something you can't sell even if it has a bid.

Tim Bourquin: Interesting. So are you kind of just collecting this garbage can of shares that you've never been able to unload and you're just kind of sitting there in hopes that one day you'll be able to unload them.?

Ed Balch: Well, as bad as it sounds, I would be willing to take the loss just so I don't have to look at them every time I log into my system.
|pagebreak| Tim Bourquin: So, there is no calling your broker saying, "just get these off of my screen, I don't care about them anymore." That's funny. Interesting.

Now, you said you went from big board shares and you decided to focus all your energy on penny stocks. And again, it was just the ability to buy a lot quickly and just with a low amount of money?

Ed Balch: Well, it was that and most importantly, just the uncertainty and the energy associated with it. And to me, it's entertainment. The best part about these is that a day after work, sitting in bed with an iPad or whatever reading forums.

It is a fun research project and sometimes it pays off. So that's the main thing that motivates me to do micro-caps.

Tim Bourquin: Give us an example of a trade that's gone well for you. Are we talking about a doubling; going from 0.001 to 0.002, or...? Give me an example of a recent trade.

Ed Balch: We've got a lot more now. I'm going to log in to my history right now while we chat, and I'll give you a specific example percentage increase.

Tim Bourquin: OK, and then while you're doing that, I'll ask you how many of these trades do you do a week, maybe even a day or a month? What's typical for you?

Ed Balch: Well, obviously with this, I always use limit orders. So they may kick off at any time to add or to let go of the position I have. So on average, I would say during a week, a typical week, I'm not a hardcore day trader, but I would say on average probably about five or ten trades a week.

Tim Bourquin: Okay. So that's pretty active. Now, I'd imagine with these things you're not looking at charts, you're not looking at any form of technical analysis, moving averages, that sort of thing that a trader of regular stocks might be, right? It's just typically the forums.

Ed Balch: Well, actually, no. I'm not a chart guy, I'm a detective, stock detective, but I do use the chart as part of my initial due diligence process. I like to look at the reverse split history of that particular ticker, because if they're doing these reverse splits every few months or so, there's a pretty good indication they might do it again.

Tim Bourquin: So, have you?

Ed Balch: I use charts for that.

Tim Bourquin: And how does the commission work? Are you just paying a flat rate for every trade, regardless of how many shares you're buying?

Ed Balch: Yep. In commission, it's a flat rate with all three of the brokers that I use for penny stocks, but it does vary among brokers.

I think Ameritrade right now is about $9; Fidelity, I think $7.95; they're all, all the ones I use are under $10. Zecco I think is $4.95 or $5. I prefer Ameritrade because I really love their Level II interface.

Tim Bourquin: And do you get confirmations pretty quickly that you now own them?

Ed Balch: Oh, well, it's very quick. Keep in mind though that with micro-caps, sometimes they don't fill as quickly...the water doesn't fill as quickly as a big board stock. I don't know why that is, but often they don't.

And I'm looking here now, this was my jumping for joy year for micro-cap trading. Just to give you an idea this is, this is the year 2009. So, from January 1, 2009 to December 31, 2009—and keep in mind these are only micro-cap stocks—but I had a 40.53% gain for the year 2009.

Tim Bourquin: Nice.

Ed Balch: Right. And the cost to make that? I invested $9,698, and then my proceeds were $13,629.87. So, it's easy to convert.

And like I said, I'm not a cowboy; I'm not going in expecting to take every penny stock to the moon. But in the year 2009, I did have a really good, good experience with a company, it was Inca Designs (IDGI).

Tim Bourquin: OK.

Ed Balch: And I made some very impressive gains there during 2009 at a high level. They were a swimsuit company, and it was discovered through not only my own due diligence, but people within the forum said that there were some ties, some alleged ties between the owner of this swimsuit company and a big personality. I think on CNBC, I may mispronounce his last name...Donny Deutsch?

Tim Bourquin: Right.

Ed Balch: So, it's one of those things. If you do your research—and that was a stock that was in the .00 price per share range, and it ran to $0.02 or so.

Tim Bourquin: Right.

Ed Balch: I would continue to add more on the dip and then sell and then add more. So that was a less volatile micro-cap stock, but I had some good gains there. That was just one example from 2009.
|pagebreak| Tim Bourquin: Tell me about that one. You said you saw it on the message board. Is that what initially caught your eye about it, was it that story, or you found that about that later?

Ed Balch: Well, I saw it on the net, that's how I found out about it was the message boards. I was actually on, also known as iHub, and this was just prowling through the forums to see what I could find.

And, well, I mean, obviously the swimsuit photos and all that caught my attention. I'm like wait a minute, they actually make something, and then I found that they had some really high-profile models that were wearing their stuff, Wilheim girls or something like that.

I asked my wife if she had heard them and she had. And then one day, I woke up and my wife called me and she said, "You're not going to believe who's on The Today Show." And I'm like, "Who's that?" And she said, "Inca Designs, the swimsuit company." And I'm like, wow!

Tim Bourquin: And hopefully you were long at that time?

Ed Balch: Yeah. Yeah, I was. I'm completely out of that now though. I mean, I had fun with it, but most of my exits were during 2009, I exited above a penny each time.

Tim Bourquin: Wow! Alright, so it sounds like it takes some research, maybe a little bit of luck, maybe The Today Show would be great. But as long as it sounds like you have the right attitude toward it and understand that what you're getting into is not kind of the regular stock trading in this area, it sounds like this could be OK.

Now could you make a living doing this? Or do you think is this just play money?

Ed Balch: I look at this as play money, and typically whatever I may make during a year, I'll put into a trip. And my wife and I would go on cruises or do nice things and I always remind her that this came from all of those sketchy micro-cap stock trades...

Tim Bourquin: What your wife that what she calls them, sketchy trading?

Ed Balch: Yeah, she thinks, I mean, she thinks that it's sketchy because none of these companies are...I mean, she understands that you shouldn't trust anything that they even put in a press release. So, she gets a good laugh out of it.

But, I mean, if you couldn't take that money to a restaurant and buy an appetizer or a dessert, you shouldn't be throwing that money into stock. Because it's more than likely you're just going to eat it and it's gone.

Tim Bourquin: Right.

Ed Balch: But you can make some gains. So, that's what keeps me coming back.

Tim Bourquin: So, what would you say is the percentage? Are you looking for eight losers and two of them to win and make up all the losers plus some, or are you looking 50/50? What's it kind of been for you?

Ed Balch: Well, it depends on the year. Usually, I would say about eight losers and two winners is about right.

Tim Bourquin: OK. So you've got to be patient and wait for those two winners to come along and make your money there.

Ed Balch: Yeah. And the thing is, the danger of that, though, is that a lot of these, when they go to the ask price of .0001, there is no bid. So, they could sit there forever or they might wake up a few months or a year, two years, three years later if there's significant news.

So, it's a wait-and-see game. And then also there's the ones that could have been gainers for yourself, but you failed to exit quickly enough. I have had several of those.

Tim Bourquin: Alright. So then, do you have limit orders, even on these ones in your account that you would rather just not go away, they would not be there at all? Do you have limit orders in, just in case they come back to life?

Ed Balch: Oh, most definitely. I have limit orders with the good-till-canceled, the GTC flag, and I'll continue to go in. Those will expire after a few months through your broker; you've got to keep an eye on them. But, if you set a GTC flag, when and if those market conditions are met, you would try to fill the order for you.

So I definitely have all of that for my laggards, and some of my stocks that I feel are going to do well. The reason being is that a lot of times with these, it's easy to believe that it's going to continue to go up in price per share.

So, a smart strategy that I often use is what many people refer to as riding freebies. So, I'll determine before a stock price starts to appreciate rapidly how many I would want to sell to at least make back my initial speculative investment because if I feel that it might be a good long-term risk play, I don't want to sell all of the shares, but I at least want to position myself or maybe I'll make a few hundred bucks' profit and then I'll ride the rest to the moon or to the basement.
|pagebreak| Tim Bourquin: Right. And, have you ever had any of those that have just been totally dead for a few months, and then all of a sudden come back to life?

Ed Balch: Yeah, actually I did. One that I got in on just because of the word "solar" in the name was Sunrise Solar (SNRS). That one I set in for .0001 for a year or so and then it ignited. I think it went close to...I don't know if touched .00, but it was up in the high .000 range.

Tim Bourquin: Alright. Well, this is certainly, I have never done an interview quite like this one before, but I'm glad to know about it. Everybody that has ever wanted to do an interview with me about this has been a promoter who just wanted to promote their stock. I've always said, no, thanks.

But, I am glad to hear from a person that actually is in there on the trader's side of it, knowing everything there is to know about it. You still have made some money and just I guess as a warning to other traders just to be careful, but there is money to be made.

Ed Balch: Yeah, and Tim, that's what attracted me to your I watched your video and I really got a kick out of how you wanted to learn more about stock. And just by meeting with others and sharing your strategies and listening to their strategies, I think that's the best way to do it.

And actually something that I do, and it's not promoting anything, but I run a YouTube channel and I post stock market tutorial videos on there. So, whatever may interest me during that day, I may post a video, everything from how to use a limit order to how to use Level II quotes. And it's, as in Epic Stock Due Diligence.

Tim Bourquin: Excellent. Alright, well, we will link to that. Do you have a blog or anything else? Or do you just use YouTube?

Ed Balch: Well, I use YouTube for that, and I don't, at least I currently don't have a blog. The reason being is that I use forums pretty much exclusively. I do use Twitter and there are a lot of experienced micro-cap traders that I have found and I follow on Twitter.

Tim Bourquin: What's your Twitter handle, so we can link to it?

Ed Balch: It's also #epicstockdd.

Tim Bourquin: Excellent. Alright, Ed. Well, I think that just about does it. Listeners, we'll link to Ed's Twitter handle and to his YouTube channel in the transcript area of the interview.

Any other last thoughts or advice for potential micro-cap or penny stock traders out there, Ed?

Ed Balch: Yeah, they are definitely micro-cap. Expect to lose it all, but don't let it scare you away because I will tell you from experience, one of the most exciting things about these micro-cap stocks is how you'll gain a better understanding of how the stock market works.

With big boards, I didn't know what a market-maker was, had no reason to know what that was because the swings were so unnoticeable. But with these micro-caps, you've got to have every tool in hand to stay on top of when to buy and when to sell.

Tim Bourquin: Alright. And, then maybe we should throw out there, what do you think is the best message board to go out there and kind of trawl for information about these penny stocks? Do you have a favorite?

Ed Balch: I do have a favorite, and actually I've got another tool as well. I've got, for a message board I use

Tim Bourquin: Okay, you did mention that, yes.

Ed Balch: Yeah. And, you commonly hear people refer to that as iHub. There is a lot of good information, and there is a lot of poor information on there. But I recommend it.

And then also, I have assisted with some video creation, some how-to type materials for a program; it's Stock Certified, And they've got a program that actually harnesses the power of social media to enable traders to hopefully gain an edge as to when something is cold to buy or hot to sell.

Tim Bourquin: Interesting. Alright, well, we'll link to as well. So, Ed, thanks very much for your time today. I appreciate it.

Ed Balch: And one more thing; I'm not...

Tim Bourquin: Yeah. No, absolutely, go ahead.

Ed Balch: I do have a book on the iTunes Store; it's called the Penny Stock Perfectionist, and I'll send you a link to it.

Tim Bourquin: Okay, excellent. We'll link to that as well for listeners too. Ed, thanks for your time.

Ed Balch: Hey, thanks, Tim. And pleasure being on your show.