Can people really achieve penny stock fortunes by leveraging penny stock trading… and even become millionaires? Well, it’s possible, but I sure hope you feel a little skeptical.
Yes, a few individuals earn immense sums in penny stock fortunes — average individuals who trade in their own time almost as if it were just a hobby rather than a real job. It does happen.
It is quite probable, nevertheless, that although they began with penny stocks they sooner or later rose to other possibly more fruitful stocks employing greater amounts of money after they felt they developed more experience and secured more capital with which to invest.
Navigate this guide:
- Understanding Risk vs. Reward
- Fortunes Require Research
- The Four Keys to Penny Stock Fortunes
- Always Do the Math
Most high return stocks come with increased risk. Naturally the inquiry then becomes, how do you begin earning a profit with penny stocks while incurring the least amount of risk?
Before we resolve that query, let us specify precisely what we intend with the term penny stocks. There are varied definitions, some less exact than others, but generally the phrase denotes low-cost, speculative stocks that typically trade at lower than $5 per share. They are quite volatile and may drop or rise several hundred percentage points in just minutes. While this can make them risky, of course, it can also make them highly profitable… if you really know what you’re doing.
So now you’re probably wondering how can you efficiently calculate what penny stocks to buy and when to trade (entry and exit points) in order to best maximize your profits. Please remember, only after you’ve practiced with paper trading and then successfully executed several trades involving tiny, low risk amounts should you even dream about executing the sorts of trades you’ll need to earn the big bucks.
Usually traders must put in the hours to become savvy pros. Only after trading stocks numerous times as well as dissecting the trends and outcomes over a long time period may a trader feel he or she truly comprehends trading penny stocks… and yet even then he may nonetheless turn a loss on several consecutive trades. Despite the many well-known penny stock patterns used to anticipate the market, none of them are 100 percent accurate. You will need to combined strong fundamentals, strong company research and your own insight to successfully trade for profit and not lose your shirt.
Yet there are, of course, many alleged shortcuts. There are numerous schemes available, methods to facilitate your ability to illuminate trends as well as profitable opportunities while they occur… however, be forewarned as most of these so-called systems are saddled with controversial problems. One primary problem is merely that any system still relies on analyzing the historical tendencies, and this still requires much time and effort. Any tool, service or individual implying otherwise may be scamming you.
A new development in stock trading — and particularly in buying penny stocks — is the use of sophisticated day trading software applications, which perform scans of stocks to identify those which are forming bullish trading patterns, indicating that the values will soon rise. This kind of software system registers historical data constantly and learns more over time. Quality applications only provide recommendations when the stock trading software is statistically convinced in the result, based on the immense volume of data it has analyzed.
Think of these four steps as a kind of pyramid of discipline. Each trade should build on the previous steps. So only when a trade fits with what you researched and planned in every step described here should you execute your trade.
- A deliberate and poised over-arching plan. You cannot trade on emotion or on impulse. Every trade you execute must be part of a carefully researched strategy. People who trade on emotion have a bad habit of losing everything.
- Due diligence in thoroughly researching a company’s history, financials and executives. Are the executives investing their own money in this company? Does the company present its data clearly or is it trying obfuscate its data for some unknown reason? Always do your own research. Do NOT rely on hype from anyone else.
- Examine the support and resistance of the penny stock pattern. Compare the pattern to historical behavior of the stock and how similar stocks behaved after exhibiting this behavior. No matter what you discover when you research the company and what your overall plan is, you must also make sure the stock presents a pattern conducive to positive trading.
- Last but not least, always use limit orders and not market orders. A market order means you buy at the current market price, which can really destroy you with penny stocks or small cap companies. This is because the value of the stock will likely change before the order is completed. Thus you should always trade with limit orders when seeking your penny stock fortunes.
Be disciplined in adhering to these rules and you will greatly improve your ability to make your fortune with penny stocks.
When I say, “Do the Math,” I mean this as a shorthand way of saying, “Do the Work.” Simply put, the people who make a lot of money do the work. No matter what penny stock newsletter a person uses, no matter what penny stock brokers successful traders choose, and no matter what day trading software he or she uses, the one thing that distinguishes the successes from the failures is that successful traders rolled up their sleeves and got to work — real, grin-and-bear-it, gotta-persevere-it WORK.
Each time you find yourself looking for a shortcut, ask yourself how bad you really want it. If you’re constantly looking for shortcuts, you’re probably not meant to enjoy real penny stock fortunes.
However, in the volatile market of penny stock trading, not every decision anyone or any application makes will be accurate, so even the best and most expensive software will not properly predict every penny stock possibility.
As always you must exercise your due diligence and keep your investments diverse. Penny stock fortunes are certainly a possibility, but I urge you not to succumb to the lure of the naïve get-rich-quick mindset. Ironically, avoiding this mindset is the key to success and ultimately your key to success.