Why Trade Penny Stocks?

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What Do You Know About Penny Stocks?

You see it every day on stock market tv shows whether it be CNBC, Fox, or even CNN; the stock market is captivating people from all over the world with one goal in mind: making money.  But where are the gains made and how can you make money with stocks? Volatility is a big helper when it comes to big gains.  Traditionally there is a lot of risk but look at things like penny stocks and you’ll quickly see that aggressive spikes in price have lead the way for very large gains in very short time periods.  Penny stocks to buy can be found in a multitude of places including penny stock chat rooms, penny stock message boards, or even penny stock websites.

penny stocks

Some of the best penny stocks to buy right now are in marijuana, biotechnology, technology, and precious metals.When it comes to top penny stocks it really comes down to timing and playing the momentum of the market.  This is important to know especially if you’re just getting started with penny stock day trading.

Many traders will tell you “don’t get married to the stocks” and this holds true in many cases.  You really should learn to develop your own system and make sure you stick to it.  The times that many traders lose is when they deviate from a trading system.  Take for instance a stock that increases 20%.  If you bought $1000 worth of the stock, you’re looking at paper gains of $200 before trading fees. If your system is “sell when a stock is up 20%,” then you would be doing really well with your plan.  But then again if you still have your own “20% rule” but hope the stock keeps going higher because you like the latest news that comes out, you could find yourself losing money with penny stocks.  Keep in mind that there is volatility so the market can move up as quickly as it can move down.

This isn’t to say that you should fear penny stocks but you need to be aware that there are many factors that can influence price movement of these small cap, micro cap, and nano cap stocks.  In many cases these deal with emotion and not so much the fundamentals of the company.  Penny Stocks generally are in the development stage or emerging company stage so there’s a good chance that there isn’t any revenue to speak of.  The mindset people hold when trading penny stocks is “get in before the crowd”.  But it shouldn’t be treated like a lottery ticket either.  Trading penny stocks takes skill, and again…proper timing.  You can be invested in the right stock but not necessarily at the right time.  Momentum plays a big roll here because many penny stocks can be thinly traded one day and then the next day the stock could have one of its biggest trading days ever.

This is just an introduction to penny stocks.  We’re going to continue to post more information for those who are looking to learn more about trading penny stocks every day.  If you ever have questions, don’t hesitate to leave a comment or send us a message directly.

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