How can i make money trading penny stocks
None of them are easy; none of them are guaranteed to make money fast. It's less risky and a lot easier to build wealth with value investing , but you must be patient: Buy cheap, talk up, sell high. The most popular way to profit from a penny stock is to buy it cheap, convince other people that it's worth more than you paid for it, then sell it at the inflated price.
This is hugely unethical and likely illegal. It's also difficult to make work. You've probably received spam email telling you about this great hot tip promising "top penny stocks for ". The price is about to explode! You'd better buy it now to lock in your profit!
Think about that for a second. Any stock that increases in value does so for a reason. Perhaps the underlying business has improved. Perhaps the company's about to be acquired. Perhaps they've just landed a huge exclusive offer. If any of this is true, it raises two questions. First, why would anyone encourage more people to buy the stock? More buyers means the price will go up. Second, how does that person know the price will go up? At least without falling afoul of insider trading laws.
It's a safe bet that your anonymous friend bought shares at 25 cents and wants to sell at 50 cents and is trying to pump up excitement to attract more buyers and drive up the price. Nothing about the business has changed; it's still worth 25 cents per share. Your friend doesn't want to help you. Your friend won't teach you how to invest in penny stocks and make money. Your friend is looking for suckers to buy the stocks they want to sell to make money fast.
Buy cheap, wait until you get lucky, sell. An ethical investor would prefer to to buy the stock of a valuable company and hold onto it until the price reaches a good sales point. Unfortunately, you can't predict luck. There's no simple way to find a list of all of the good, cheap stocks to invest in. Not all good stocks are cheap and not all cheap stocks are good: Struggling companies can turn around, but a struggling company is struggling for a reason, and its stock price will reflect that.
At least in Las Vegas or Atlantic City, you know the odds of winning before you put down your money. Penny stocks offer no such guarantee. Unlike a casino, you won't end up owing money in the stock market unless you chase more exotic investments like futures, options, and derivatives. Do your research, buy a discounted business on the upswing, stay patient.
Once in a while, a company will go through a horrible bankruptcy and end up restructuring or getting bought out. Perhaps it can get out from under huge amounts of debt or it has a lot of inventory or capital equipment or real estate or patents or other valuable assets that are worth something to an acquirer.
These investments are rare. It's not easy to predict when an airline will turn around or when a Canadian plutonium mine will find a new vein—but it happens. If you're careful and do your value analysis , sometimes you can find diamonds in the rough: Sometimes the market is irrational and undervalues a business.
It's unfair, but it happens and it represents a real opportunity. This is rare and risky. Most penny stocks are terrible opportunities, with flawed businesses and business models.
The best penny stocks today won't be penny stocks for long. Even if a stock has a great price, and if it seems like 25 cents per share should be easy to double or triple your investment, be calm and careful. And I bet that that you are male, want a fancy car, and are between the ages of 18 and 33 - just a guess. Watch the Penny Stock Protections - pay honest attention to them, even though you may already know some of the concepts.
This step is for people who are serious about becoming great penny stock traders. It is also the longest step, but the most important one. We get into the good stuff right after! Read Penny Stocks for Dummies. Yes, I wrote it. And if you buy it I get a small royalty. Or even buy it anywhere books are sold , and ask for the royalty to be returned to you.
I will have Tammy or Lisa send you the dollar. Even if I make zero, read the book. Here's where you get started "trading" penny stocks. But, we're going to get into it with ZERO risk, and absolutely no money. If you followed the step above, you already know exactly how. For the rest of you slackers, it's called "Paper Trading. Here's how to Paper Trade. Anyway, paper trade until you can demonstrate that you would be making money. If you are so good and impatient that you can't wait to get started with real money, just pause for a minute.
You'd be able to prove how good you are, risk free, and by the time you actually trade, you'll be even better and just as impatient , I promise. Here's the step where I might sound like your grade 7 teacher. But, it's an important step to gauge progress and set a benchmark for where you are at. It will allow you to know how good your trading approach is becoming.
If you've been following the steps up to this point, you may do much better than my own conservative answers. But I'm just trying to lower your expectations, so it's easier to exceed them. We're almost to the point where you actually buy your first penny stock. First, try to pick 2 where you lose money. You read that right. Pick 2 penny stocks where your investment is going to go downhill. Picking a winner is the same process as picking a loser.
By selecting penny stocks that will decrease in price, you actually put so much of what you've learned in the earlier steps to the test. You do not want to be the joker who wins big the very first time they enter the casino. They never learn how seriously to take things, or how hard it can truly become. They never even recognize how unbelievably lucky they were the first time.
You can actually talk to one of these guys about their experience - they are drunk in the Las Vegas alley beside Caesar's Palace. You want to be more like me when I started - losing it all immediately. I responded by " Paper Trading" like crazy , and reading every investment book I could get my hands on.
I took the best parts of each approach, and ignored what I felt wouldn't work. This gave birth to Leeds Analysis , and eventually I was kicking a little bit of butt in speculative shares. You have the luxury of skipping that massively educational, yet time-devouring stage, because you have found me, and gotten to this step. Don't actually buy them! If they don't act as you expected, look for others. Take as long as is required to do this step, whether weeks or months.
Do not proceed until you have been successful at this stage. This step may make all the difference in the world. There are many places to generate ideas for potential investments, and you need to decide which ones to trust. Try different sources major media, trade publications, professional analysts. Discard those that aren't working for you, double down on watching those that are panning out well.
Remember, follow but never believe the mass media. Watch them to get a pulse on the market, but don't expect what they tell you is accurate or will ever come true. For example, CNBC is just telling you what has already happened, and what the mob is doing now, but presents it like current news. CNN makes money by scaring you - but if they are telling you that terrorists are going to take down every plane in the sky, you know air travel is safer than ever.
If they are talking about an Ebola pandemic, it means the outbreak is finally getting under control while I've been talking about it for years before CNN ever mentioned it! Typically, the investor sentiment they are telling you will be useful when considered as a contrarian indicator. More about sentiment near the end of this video optional. If you already have a stock broker, skip ahead a step. If you do not, you will need to open an account with a discount broker, and deposit the funds with them which you wish to trade.
It is a very easy process. The best brokers for penny stock traders can be viewed on our Official Discount Broker Review. That's an infographic, but you can also see our findings in this blog. You need to choose which broker you like best, since it depends what is important to you specifically. No account minimums, friendly service, low costs per trade?
Any broker is going to take a very small fee every time you buy or sell a stock. You should narrow your focus to industry groups which interest you. If you like technology, or if you understand biotech, you will have an advantage over many other traders in the space.
You can even get more granular - for example, focusing on offshore oil production companies, rather than just the overall energy industry. Greater focus will improve your trading results, and allow for faster growth in specialized knowledge. Look at all the stocks in the industry space s which interest you. You should look into a company's most direct competitors, which typically can be done on most major financial web sites.
Choose the penny stocks which pass the tests you learned in Penny Stocks for Dummies , and would likely pass Leeds Analysis. Build a watch list of at least 10, but preferably 20 or more stocks.