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My Penny Stock Strategy: Trade Less and Profit More Using Easy Patterns

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My Penny Stock Strategy: Trade Less and Profit More Using Easy Patterns My Penny Stock Strategy: Trade Less and Profit More Using Easy Patterns What Are Penny Stocks? Penny Stocks Definition: As mentioned above, the SEC defines a penny stock as any stock that trades at $5 per share or less. ​ ​ ​ ​ These stocks also have other things in common, such as the following: ● Highly speculative: This means that the stock has a high-risk, high-reward balance. If the ​ stock does well, you have a good chance of making excellent returns. ● Small cap: Penny stocks are generally tied to small capitalization markets. In other words, the ​ company has a relatively low stock valuation — under $2 billion, in most cases. ● Large bid-ask spread: This means that there is a large difference between the asking price ​ and the bid price. In other words, the amount someone is willing to pay is much higher than the price at which someone else is willing to sell. What Are Pink Sheets? Think of pink sheets as the OTC version of large market exchanges. Every day, the National Quotation ​ ​ ​ ​ Bureau publishes a pink sheet with the bid and ask prices for penny stocks and other stocks that ​ ​ ​ ​ aren’t traded on the larger market exchanges. They were named because of the pink paper on which they were printed, and the stocks traded therein can be identified by the “.PK” added after their stock symbols. What is Penny Stocks Trading? Penny stocks trading refers to the activity of actively trading penny stocks on markets like the OTCBB and OTC Link. The types of stocks you can find within the Pink Sheets are just as varied as in any other market. The only difference is the extremely low price of each share. ​ ​ To trade penny stocks, you’ll need an experienced, knowledgeable broker. Some brokers charge extra ​ ​ ​ ​ if you want to trade a large number of shares in a single transaction, while others limit the number of trades you can make in a day. How Do I Get Started With Penny Stocks? The best way to get started with penny stocks is to find a broker and educate yourself on the market. ​ ​ Learn the language and jargon, the types of companies that trade in the OTC market, and as much ​ ​ information as you can about micro- and mid-cap companies. You should have a specific goal and strategy in mind before you begin trading. Since penny stocks ​ ​ tend to be more volatile, you don’t want to go into this type of investment blindly. Biased Recommendations You might have heard of influencer marketing. It happens when a company pays a popular social media user to promote its products. The influencer receives a flat fee for tweeting or posting on instagram, for instance, and the company gets access to the influencer’s audience. ​ ​ This also happens in penny stock trading. A company that wants to push its own stocks will pay someone in the industry to send out social media posts, emails, and press releases that don’t necessarily look like advertisements. Offshore Brokers Unfortunately, boiler room operations are also more common than you might think. These schemes involve selling stock to foreign brokers at discounted prices, then selling them back to U.S.-based investors for a handsome profit. The SEC doesn’t require offshore brokers to register stocks, so it’s easy to get taken in by this type of nefarious scam. It’s even easier when it comes to penny stocks because they’re subject to less oversight and because small transactions can easily fly under the radar. The main tipoff is a cold call from a brokerage. The person will use high-pressure sales tactics to convince you that you can buy a certain number of shares for a “steal.” Always initiate your own investments instead of agreeing to a transaction after a cold call. Most Common Questions Regarding Penny Stocks There are five questions I hear very frequently from other investors: ● Where should I buy penny stocks? ● What techniques do I need to learn to be successful? ● How do you find hot penny stocks to invest in? ● Which are the best penny stocks to invest in ● Are penny stocks profitable? Let’s take these questions one at a time so there isn’t any confusion. Where Should I Buy Penny Stocks? The first thing you have to realize about penny stocks is that they’re incredibly cheap, so it’s not always profitable to use a live broker. In fact, I recommend against it. Instead, use an online broker that allows you to make trades for yourself. You know that I’m a huge advocate for learning and studying, so devote yourself to learning as much as you can about the penny stock trade. Knowledge is definitely money when applied effectively. Keep in mind that pennystocking is all about generating quick returns. You’re not holding on to these stocks for months or years on end. Instead, you’re actively trading every day to build up your portfolio and increase your wealth. Therefore, you need a strong online broker to make sure you don’t get conned out of your cash. What Are the Best Brokers to Buy From? There are a few online brokers that I can recommend after personally using them. ​ ​ First of all, eTrade is definitely a good bet. It’s a huge firm that has helped thousands of people build ​ ​ their wealth. I’m also a fan of Interactive Brokers, so see this blog post for more details on the best ​ ​ ​ brokers. ​ What Techniques Do I Need to Learn to Be Successful? I use several techniques to trade penny stocks on a daily basis. My students have used them, too, to great success. If you’re willing to learn the logic behind these techniques and apply them to your own trading, you’ll make money and increase your net worth. It’s important, though, to find a strategy that works for you. Some people prefer technical over fundamental analysis in most situations. You have to learn to trust your instincts and experience as you gain more perspective on Pennystocking. Penny Stocks Patterns Lots of different types of charts exist, and as you gain exposure to them, you’ll figure out which ones are more informative based on your learning style. No matter what charts you follow, though, you’ll be able to visually assess a penny stock’s performance. I’m particularly fond of the candlestick pattern charts. They can be either extremely complex or highly simplified depending on the types of information used to form the chart. You can recognize them by their candlestick shapes with the accompanying wicks. Technical Analysis In many cases, technical analysis is best for pennystocking because it’s designed for shorter-term trading. In other words, if you’re buying and selling stocks within minutes or hours, you don’t want to bother with fundamental analysis too much (which I’m going to describe in a minute). True-blue technical analysts believe that all the information they need can be found in the charts. In some ways, they’re right. However, technical analysis also assumes that future patterns will mimic past patterns. It’s possible for a stock to bottom out suddenly with no warning in the charts. This is often as a result of news about the company or other changed financial matters. Fundamental Analysis Remember, penny stocks are attached to smaller companies. They have low liquidity, high volatility, and limited products or services. Paying attention to details can help you make more effective trades. For instance, you would look differently upon a stock for a company that has just received a massive influx of VC capital than one that has taken on a huge amount of debt. As I mentioned above, fundamental analysis is most often used for long-term trading. The investor wants to hang on to the stock for a long period of time to maximize returns. Day Trading Penny Stocks Since penny stocks have such high volatility and are so cheap to buy, you can earn small returns through frequent day trading. If you’re constantly monitoring companies’ performance and jumping on stocks in a so-called growth stage. This isn’t to say that all penny stocks move quickly. Some don’t. That’s why you have to learn the technical aspects of pennystocking. You’ll know when to hold off on selling, when to sell short, and when to sell right away. Day trading is great for pennystocking newbies because it eliminates risk. For instance, stock can fall precipitously overnight, so if you’re able to get out before the market closes, you’re less likely to lose money. How Do I Find Penny Stocks to Invest In? There are many reasons to invest in a penny stock. For instance, if you’re playing the long game, you might notice an economy-related drop in stock. If you know that market conditions will likely rally, you can invest in the company at less than $5 per share, then sell up when the stock eventually rebounds. You’ll want to examine the charts for any company you consider. It’s often helpful to start your search by sector, then market, then individual stock. You’ll get a better idea of competition, performance, financials, and more. What is the best way to trade penny stock? Finding a cheap, but solid broker like these penny stock brokers is the best strategy if you’re starting ​ ​ ​ ​ with very limited capital. Some of the brokers I’ve worked with have had starting minimums of as much as $30,000.
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