Penny stocks are extremely profitable. In fact, you can make much more money trading penny stocks than you can trading other stocks with one very important caveat: penny stocks trade in a world where the risk is extremely high and the scams run rampant. So, one of the most essential keys to making good money with penny stocks is avoiding all unnecessary risk, and beyond this, reducing risk across all your trades - including avoiding all penny stock scams. If you can substantially reduce risk, it actually becomes quite easy to make really good money with penny stocks (especially with the last technique below).
To understand how to reduce risk, let's first look at where penny stocks trade:
1. NYSE - New York Stock Exchange (yes, you can even find pennies here occasionally)
2. NASDAQ - National Association of Securities Dealers Automated Quotations - more info on nasdaq penny stocks
3. AMEX - American Stock Exchange
4. OTCBB - Over the Counter - Bulletin Board
5. Pink Sheets - Originally these were printed on pink paper - these include the otcqx stocks
As a general rule, the publicly available information becomes less and less as we move down the list above. However, by far the biggest jump occurs between the OTCBB and the pink sheets. This means that if you're a scam artist looking to pump and then dump a penny stock, you're much more likely to do so for a stock trading on the pink sheets since there is often so little information available about these companies. You can say whatever you want with little to no way to verify the information. Also, as a general rule, it is much harder to be listed as you move up the list - more qualifications and more reporting/scrutiny required.
For the reasons above, one really easy way to drastically reduce risk is to avoid penny stocks trading on the pink sheets. There are exceptions to this of course and there are times when you (or someone who you really trust) may have really reliable information that shows a pink sheet stock worthy of investment - but the majority of penny stocks trading on the pink sheets are probably not worth trading. Basically... don't believe hype and don't trade a pink sheet stock unless you REALLY know what you're doing... and if you don't know what you're doing or don't have the explicit exact advice of someone who knows what they are doing, then I recommend avoiding the pink sheets all together.
Here's another good trick to avoiding unnecessary risk and reducing risk overall...
Pay close attention to trading volume. Almost all penny stocks are going to have a far lower than average trading volume and that's ok.... and expected. However, what you need to avoid are penny stocks that are trading at such a thin volume that it would be difficult to buy the stock (have someone fill your order) without the price going up significantly before the transaction goes through.... AND... where it would be extremely difficult to sell and you may get stuck with stock that is plummeting and you can't get out! There is no exact magic number here but you should probably avoid trading penny stock which has an average daily volume of somewhere below 300,000 - 1,000,000 shares. Basically... the lower the volume, the higher the risk.
Avoid all advice from people focusing entirely on "shorting penny stocks." This is a very dangerous venture and extremely high risk - and yes, I know there are sites out there that will tell you otherwise but it just isn't true. I'll try to get back to this in other posts but for now, just avoid it as it is very risky and you'll likely get caught with your pants pulled down so to speak.
Now, the next thing I'm going to say may not be what you want to hear but it is true and I have found it to be the #1 best way to lowering risk and consistently making high profits with penny stocks...
Never rely on "free" information when it comes to penny stocks! NEVER! So called "free newsletters" and "free ecourses" are a great way to lose your money. They are full of pump and dump scams and information from others who are unknowingly passing along the hype from pump and dump scams (or other hype that will turn out to cost you money) trying to pass themselves off as experts. Yes, I've gone down that road - reading absolutely everything I could get my hands on - thinking I could "outsmart" the scamsters - thinking that all I had to do was find the right "free newsletter" and I'd be set - WRONG!!! I know from personal experience how hard it is to resist "free" information but if you really want to make a lot of money with penny stocks and especially if you want to significantly lower risk, you need to force yourself to resist the so called "free" information.
Besides directly steering you in the wrong direction, "free" information (I keep putting "free" in quotes because I think anything that can easily make you lose your entire investment isn't really "free") is an ENORMOUS TIME SINK - you can literally waste dozens of hours a week reading this stuff and researching what's in it - and this will prevent you from seeing what you REALLY need to do. In fact, this is what prevented me from discovering the easiest and most profitable way to trade penny stocks.
Now, here's what I discovered when I really needed to make a bunch of extra money and fast. A really quick way to avoid all these risk factors and make sizable profits from penny stocks over and over again is to buy premium penny stock picks. Everyone I know personally who is making fantastic money with penny stocks buys premium picks. In fact, I don't know of any person making good money with penny stocks that isn't. It seems to be the REAL SECRET to success.
To research penny stocks really well and be able to pick the top 1% at any given time on a consistent basis, you've got to be exceptionally good - not only at traditional stock analysis but you also need really good investigative reporter skills. You've also got to devote MORE THAN full time to it. There are only a few people who can do this well on a very consistent basis.
What I recommend to all my friends who want to start trading penny stocks (mostly because they see how much money others are making from it) is to buy some premium picks (they really aren't that expensive) from experts conducting extensive penny stock research and start paper trading to make sure the picks are consistently profitable. Once their comfortable, I recommend to them to start "small" (of course this varies from person to person but even a $500 initial investment can lead to substantial profits in a very short period of time with penny stocks).
Here is one of the very best penny stock picks services I have found. These picks are very profitable on a very consistent basis and the cost is far better than most others I've tried/seen. There's lots of bonus information too that will surprise you once you sign up.
Good Luck To You and I hope I've helped!!
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