By financen | December 19, 2017 - 6:34 pm - Posted in Investing, Penny Stock

Making money from penny stocks is possible and there are a number of ways to do it – here’s what you need to know.

  1. Know The Risks

Penny stock trading is a risky game. You first need to understand how to trade and the risks involved before diving into the market. One thing you need to know about penny stocks is that, they are neither backed by established companies nor do they have a set minimum standard. This means you may or may not find the stocks in pink sheets or Over-The-Counter Bulletin Board (OTCBB).

Just because penny stocks are cheap to buy doesn’t mean you cannot lose significant amounts of money trading in the same. Most penny stocks are either scams or have no value whatsoever, which again increases the risk factor. It takes lots of research and knowledge to identify genuine stocks from scams. Some of these stock companies build their profile and value to gain access to the securities market; many of them, however, crash before they can mature.

A Bad trade can make you lose some good money, or even drive you into debts or bankruptcy. Researching on a penny stock and only injecting amounts you can afford to lose is the only way you can mitigate risks here.

  1. Research On Penny Stock Companies

Just as it is with secure stocks, it is your responsibility to study and know about a commodity’s trend and potential for growth before investing in it. Penny stocks pose a significant risk as they are unregulated, meaning you could spend in an underperforming or a scam, losing your money. Researching on stocks you may be interested in is the only way to reduce the risk factor.

You could find loads of wealthy information from trading groups, forums, and reputable newsletter sources. Although most financial advisors advice against buying penny stocks, some will help you identify promising ones to trade on. It would also be best for you to look into a newsletter source or group before signing up with them. Here is a regularly updated list of stocks to buy. Although there are a couple of trustworthy penny-stock newsletter sources out there, the highest percentage is made of scams.  Penny stocks with too little or inadequate information about the company should be treated with suspicion. Most of these are scams.

  1. Look For An All-Inclusive Stock Filter

A stock filter is an essential tool for every trader. This tool helps filter stocks based on a set preferences such as trading lows and highs, price, and trading volume among other factors. A good stock screener should also help you identify promising and trustworthy stocks you can invest in. It takes the guesswork out of your trading quest.

  1. Sell Quickly

Penny stocks are meant for short-term investment only. Very few penny stocks last long or mature to make it in the securities market sector. Holding on to your penny stocks for too long only increases chances of losing it all altogether. It’s therefore advisable to buy and sell penny stocks fast enough for as long as there’s profit. Small profits of up to 20 or 30% can help you make good money as a stock trader. Take or withdraw your earnings as soon as they mature, and never wait for astronomical returns.

  1. Cut Down Losses

Unlike the stable stock market where most stocks bounce back after a losing streak, most penny stocks don’t. This is mainly because most of these companies are still new and facing financial struggles. Should a penny stock dip, sell it as quickly as possible to avoid losing more money. Playing the ‘patient’ trader with penny stocks will only leave you bankrupt.

  1. Disregard Hyped Up Newsletters

Although some newsletters may be genuine, most can be misleading. Be sure to confirm the reports by researching intensively about the stock before making a purchase. You will be surprised how some newsletters can be unreliable.

Stock trading is a risky game. The financial markets are quite unpredictable, which is why you need to take calculated trades and risks to avoid losing all your money. Nevertheless, information is the key to making good money with penny stocks. As long as you can research, interpret statistics, and even follow up the latest financial reports, you will do just OK investing in these stocks. Steering clear of unreliable news sources and scams is the first step to making it as a penny stock trader.


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