A penny stock is a low grade security that is sold for less than five dollars per share. In comparison to trading bonds or traditional stock, they are a high risk/high reward type of investment.
Many everyday people are inspired to trade penny stocks because of people like Tim Sykes, who famously became a millionaire from trading penny stocks with a relatively small investment. He even offers the Timothy Sykes millionaire challenge that reveals the very same strategies he used.
Is trading penny stocks guaranteed to make you a millionaire? No, but anything is possible.
Here are the top five steps to find and trade penny stocks:
Know That You Are Taking A Risk
The first step is knowing that you are taking an inherent risk by trading penny stocks. Penny stocks are incredibly volatile, and while some stocks can yield high returns, others are simply not worth investing in.
Research The Companies You Want To Invest In
Never buy the stocks of a company without first researching that company thoroughly. You need to fully determine whether investing in the company will make for a worthwhile investment.
Specifically, you will want to look at the profitability of that company, which you can research through their income or earning statements. A company that hasn’t reported profits is far less likely to increase in value. You can also review the quarterly financial statements of a company on a major secured exchange such as NYSE or NASDAQ.
Create Your Investment Account
Once you have a found a company you feel comfortable investing in, in order to buy penny stocks from them you next will need to create your first investment account. Go to a major trading platform such as AmeriTrade or eTrade and register with one of them, and you’ll be given full access to trading penny stocks.
Buy Your Penny Stock
Once you have your investment account set up, you can now begin to purchase your penny stocks. Simply select the stock of the company you want to buy from and select the quantity that you want.
Watch Your Investments
Now you need to carefully watch your investments so you will know when the best time to sell is. The value of penny stocks are well known for changing very quickly, so make it a habit to check up on your investments every half hour or so throughout the day (you can do this through an app on your phone when you’re not at home).
It’s perfectly normal for a particular stock to fall dramatically in value right after you make a buy, so don’t panic when you see this happen. Simply wait for the price to climb until it surpasses the amount you bought it at, and then make the decision to sell to earn a profit.
Finding and Trading Penny Stocks
Becoming successful with penny stock investing will require a learning curve, but if you are dedicated and have enough patience, you just might receive the profits you’ve always dreamed of.