Since you are reading this blog on stock trading, odds are you probably know somebody who has already made some good money trading; otherwise, you probably wouldn’t be interested in the whole idea, right?
Taking this a step further, it is probably even more likely that the person you know made their money trading stocks under $5 – also known as penny stocks.
Certainly the idea behind stock trading is not complicated, but knowing which stocks to play and which to avoid can be tricky, especially when dealing with these so-called penny stocks. After all, there is a reason these stocks are valued within the single digits.
Being that I come across new traders all the time, I always get questions looking for my advice on a stock and more often than not the price of those stocks are under $5.
Obviously, trading penny stocks can be a really profitable venture (you can buy more shares of a stock at $3 than a stock at $20), but it can also be an account crusher and end your trading experience all together. Mainly because you cannot trust these penny stocks and ANYTHING can happen at ANY time.
Penny stocks are volatile, unreliable, and secretive. When it comes to profiting off these type of stocks it really has NOTHING to do with the “special” product that the company is selling, rather the news surrounding the company.
Knowing how to CORRECTLY trade penny stocks essentially requires a strategy of being able to conduct research and analyze the good news from the bad. Tim Sykes, a popular trader who plays with penny stocks, has put together a good video on penny stocks, which you can check out here.
I highly recommend it. I even checked it out for myself.
