How to Invest With Penny Stocks:
First Off, What Are Penny Stocks?
The exact definition of penny stocks can be quite ambiguous, but for the most part, they are low-priced speculative securities of small companies. Their price per share can range anywhere from less than a penny to a few dollars. Considering the fact that they are “speculative” and deal with “small companies”, they are inherently dangerous.
Why Invest in Penny Stocks if They’re Dangerous?
The reason people invest in penny stocks is simple: They’re lured by the prospect of quick, large gains. Not only can you buy more shares at a low price, but these stocks can absolutely skyrocket with big news. Some savvy investors even like to implement a buy-and-hold strategy with penny stocks, hoping they will grow into giants over time.
To Succeed, You Need to Have a Defined Strategy:
1) The subscription fee can be paid off with profits from only 1 or 2 trades.
2) The education alone is worth it (video lessons, webinars, daily watch lists, etc.)
3) It will also save you time researching the market for high-potential winning trades.
- Timing is Everything → If you don’t have time to consistently research the market and follow a group of specific stocks, then you will benefit greatly from a service that provides you with watch lists, real-time alerts, and a chat room.
Top Small Cap Newsletter On Wall Street:
Jason Bond Picks is a trading service that focuses on stocks between $00.01 and $10.00. The goal is to capture 5-10% gains on each trade, rinse and repeat. Jason offers a master watch list of about 100 stocks he’s watching, daily watch lists of more specific (3-5) stocks he’s stalking for entry, a chat room filled with 400+ traders daily, a library of 50+ video lessons, various webinars, and most importantly, real-time text/email/chat alerts featuring every one of his buys & sells.
You Need an Expert’s Guidance:
There Are Many Reasons to Fear Penny Stocks:
1) Pump & Dumps: Need to do your due diligence. Don’t get sucked into stocks that are only rising because a stock promotion company is touting it.
2) Manipulative Traders: They try to drive the price up/down to force others out of their positions. These are deceptive practices that can add an element of unpredictability.
3) Liquidity: If you put money in, you want to make sure there are enough people buying to get your money back out.
4) Little Known Information: For small companies trading on OTCBB & Pink Sheets, trades are often made without knowledge of accurate financials, company structure, etc.
Choosing a Broker – They Are Not Created Equal:
In order to buy any stock/security, you need to have a brokerage account (TradeKing, E-Trade, Scottrade, etc.). Before signing up with any of them, you need to consider your trading strategy. Fees & commissions can be different for penny stocks, options, bonds, etc. You should also consider sign-up bonuses (some brokers will offer you hundreds, maybe even thousands, of dollars depending on how much you deposit) and tools (charts, scanners, research, technical analysis, etc.).
Keep your eye on Robinhood. Their top priority is to eliminate commissions and minimum deposits.
Wrapping Up Penny Stocks
As with any form of trading, penny stocks or not, self-discipline is vital. With the help of an expert trading newsletter, take your 5-10% gains while you have the chance – they can really add up over time. Don’t be greedy and let trades end up going negative on you after being up 10%+.
- Take advantage of the opportunities the market gives you, but don’t force trades
- Cut losses fast
- Invest within your means
Unfortunately volatility, manipulation, and a lack of recorded financial performance make penny stocks shady. But that same volatility, low price per share, and potential for huge gains, makes them worth the risk for many traders. Be careful and trade green!
Written by Matthew Thomas