Before everybody decides to bring their pitchforks out, I’d like to say that, yes, penny stocks are worth trading, just not how mainstream think. Those who start off in the stock market with a low budget tend to go for penny stocks because they can purchase more shares in hopes that they skyrocket. It’s not necessarily bad logic, penny stocks are the most volatile stocks. That however, can be both and positive and a negative, but mostly a negative.
The reason why people look down on these micro-cap stocks is because most people buy into these $3 stocks in hopes of them soaring over $10, and the moment they turn away from their computer, the stock can be below the $1 mark. Is it possible to make money off them though? Of course, but remember, 90% of people lose money in the stock market so if such a high percentage of losing is possible, imagine how much it is on such a volatile scale as penny stocks; pretty damn big.
Keep in mind that companies do not list themselves on the market because they’re so kind and they want to make you some money by investing in their company. These companies are looking to give away a percentage of their company for your money. They hold shares in their company as well, and once more people decide to buy their shares, the price of the shares will go up and they will have made a hefty amount of cash upon checkout. They will eventually sell their shares and the stocks will plummet to the ground, causing many shareholders to lose a lot of money. So are penny stocks worth it?
Yes. You can still make a lot of money off of this in two ways and both involve getting and out early. First of all, in order for these micro cap stocks to go shooting up in price so quickly, they usually pay a penny stock promoter to send out emails to their subscribers, promising the moon, leading many to come flocking towards the stock and letting the company executives cash in. What you have to do is be there first. You have to quickly buy that stock as its beginning its surge and sell it off as soon as you have made a nice amount of profit, especially after brokerage fees. When is the best time to sell? I’ll write an article about it, but if you’re interested in following someone who finds out when stocks are about to be promoted and shot up, this is the guy.
The other way you can profit from this volatility and pump and dumps is on the dump part. The beautiful thing about the stock market is that you don’t only have the option to invest in companies, you can bet against them too. Some people will say that it’s immoral but it’s far from the truth, some of these companies are scumbags and they are just in it for the quick buck, leaving their fooled investors broke. I learned to do this courtesy of Mr. Tim Sykes and it has been a working strategy for me. You have to be careful of following Tim’s picks though because he goes in with a lot of shares so get in early and leave early. You have to understand, just like promoters, the alert guys have a big following and you don’t want to overstay your welcome. The great thing about Tim’s service also is that he creates write ups which will help you learn how to research and then later find your own stocks to short.
So now that you know penny stocks are a great niche market to explore, you should still be careful of whom you choose as your broker, as fees eat into your profits. Check the rest of the site out for some reviews on brokerages that I’ve used and am using. Also, sign up on Profit.ly (it’s free!), it’s great, I’m always tracking my trades and seeing what I’m doing right, but most importantly, what I’m doing wrong, which increases my knowledge and profits later on.