Can You Still Make Big Money on Penny Stocks?

Can You Still Make Big Money on Penny Stocks?

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Penny stock, as the name says are characterized by low trading price, volume and market cap, which makes them, in the view of many investors inherently risky for trading. However, is it still possible to make big money on penny stocks, bearing in mind all the aforementioned risks? Let us find out.

What they are and where are penny stocks to be found?

Quite simply, penny stocks are those stocks that sell at a very low price, often below one dollar per share, which means that they are sold on OTC, instead of on the NYSE, for example. Having such a low price makes them almost invisible in the market, usually, they are not listed on any major stock exchange and you need to have a really good broker to track them. Why is this so? Because trading them usually means that you will lose money. Here is why.

Losing money on penny stocks

This happens frequently and due to a number of important reasons. Penny stocks values are volatile and things rapidly change, people buying them expect to make a fortune overnight failing to see the bigger picture, such as the history of the company they are buying stocks of or where they got the information from. Furthermore, keeping the stocks for too long, as well as investing money in companies that lose money, is almost always a sure path to losing money.

Making money on penny stocks

There are rules you have to stick to at all times if you wish to make money trading penny stocks. First of all, you need to do your homework before investing even a dime. Do not be fooled by the percentage forecasts and profit you are supposed to make without knowing every possible detail about your potential investment. You are looking for companies that post solid earnings have recently secured new contracts. Investing in industries you know is also another smart move. Also, if you have information that a company that is currently on the downside is about to turn around, either due to new contracts mentioned above or if the company has valuable assets or property, or even some patents that could help it rise up again, this can mean that the value of stocks is going to increase. Another important indicator of possibly good investment are stocks exceeding 52 weeks on volume of at least quarter of a million shares a day.

Big Expectations

Don’t have any. Turning a 30 to 70% profits in a day is a great achievement, anything above is pure luck. Also, be prepared to go long and short at the same time, admit your mistakes and get out of trade when they go the wrong way, regardless if you are losing or gaining. Also, focus on actively traded stocks, ignore stories about companies, facts are what you are relying on.

To sum up, the best penny stocks investment strategy needs to have everything mentioned here covered at any moment. Making big money is possible if you are meticulous, react fast, able to admit mistakes, which are bound to happen sometimes and prepared to take your time earning since making small profits of 50 to 75 cents per share is a serious success when it comes to trading penny stocks.

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