How To Make Money Day Trading Penny Stocks

There’s a lot of money to be made day trading penny stocks. It definitely is not for the faint of heart, since on this site we never shy away from the fact that investing in penny stocks does involve a substantial amount of risk. What keeps people in this business is that when you make money, you literally kill it. If you need to make some quick profits, then day trading penny stocks can be the perfect way to generate some extra income.

While the profit potential is definitely there, that doesn’t mean that you’re going to be making money in the first couple of days. Getting good at penny stock trading requires studying and practicing before you get any good at finding the hot stocks about to explode. Once you get some experience under your belt and your picks get more accurate, you can achieve returns that are way better than you would by investing in the stock market for the long term.

To understand the power of penny stock trading, long term investing in the stock market generates an average yield of about 10% per year. With penny stock trading, returns of more than 100% (that’s when you double your money) are not uncommon, because the stock prices are low and there’s a lot of room to grow. We’re not saying that averaging 10% return a year is a bad thing, it can actually make you wealthy! The only issue is that at the beginning you hardly feel it. On the other hand, day trading penny stocks means that you can target 10% or more in profit every month. Compounding interest is a phenomenal thing. Imagine what would happen to your financial status if you grow your wealth at 10% a month.

How to make big profits in day trading penny stocks?

Obviously, you need to find the best penny stocks to invest in. One of the criteria you should look at is the market capitalization of the companies that are listed. A company’s market capitalization (usually referred to as market cap) is found by multiplying its share price by the number of shares available. That number should be relatively small when compared to other companies in the sector for the stock to represent a great growth opportunity. Of course, different people will have different criteria, but it makes sense that the cheaper the stock, the more growth potential it has, provided that it’s a good company in a profitable sector.

If you come across a penny stock company that’s touted as “the next Microsoft”, or “The next Google”, chances are it’s a “pump-and-dump” scam. Because of their low price, penny stocks are prime targets for people trying to influence their prices by hyping them up without anything really substantial to back their claims. That’s not to say those stocks aren’t good to trade. If you’re day trading and can realize that they’re trading vehicles and not long term investments, you have a good chance of making some money out of them.

That leads us to the final point of being a successful penny stock day trader. Successful penny stock day traders don’t hold on to their winning stocks with the hopes of retiring from the profits of that one trade. This is the province of long term investors. If anything, most day traders will sell a portion of their holdings in that stock to recoup their initial investment, and will then ride the remaining shares as long as possible.

Every investor getting into day trading penny stocks tells themselves that they won’t fall for the hype that surrounds many penny stock offerings, but unfortunately the vast majority of them do, out of fear that they might miss out on the next big thing. Remember that one wise man once said that “you don’t have any profits until you sell”, so no matter how high that stock you’re holding has gone, until you sell it, you haven’t made money yet.

The goal of this post is not to discourage people trying to make money day trading penny stocks. In fact it’s quite the opposite, as we want you to be ready to face the challenges that will come with such a great money making opportunity.

© How To Make Money Day Trading Penny Stocks

Mistakes To Avoid When Trading Penny Stocks

Saying that penny stocks are attractive investments is pretty much stating the obvious. They are cheap since the maximum price of a penny stock is $5. That means that the barrier to entry is very low and people with very little money can still afford to invest in them. And then, there’s the profit potential, which is absolutely amazing. Suppose you buy a stock for a dollar and it surges to, say, $18. That’s $17 profit for every stock. If you had purchased 500 of these babies, then that’s 500 times 17, $8,500 profit before commissions. Such a surge can happen in a matter of weeks, sometimes days. But don’t let the profit potential fool you; just like every other investment, high reward comes with high risk, and your penny stocks are as likely to explode as they are to fall, so you’re going to have to thread with caution.

Nevertheless, penny stocks open the doors of stock market investing to people who can’t or don’t want to invest in standard stocks. The beginners are especially prone to a couple of serious mistakes that can leave them with losses, so here are a few helpful tips if you’re getting started in penny stock investing.

First of all, as stated above, the price of penny stocks is capped at $5. Since they’re relatively cheap when compared to other stocks, it’s tempting, especially for beginners, to just focus on the profit potential and invest in just one or two stocks without doing proper research first. They feel like there’s little chance the price of the stock will go down, since it’s already pretty low. Truth is, research is crucial if you want to limit your losses, because it’s important that you know whether you’re investing in a good or bad company. Even more so than established stocks, your research on penny stocks is the key to making money, because they are not listed on the main stock exchange. So you’ll be dealing with companies that are less established and you’ll probably have to dig a little deeper to find the information that you’re looking for to make your investment decisions. The bottom line is that you should not invest one penny (pun intended) until after you’re done thorough research.

While we’re on the subject of research, pay attention to the sources you’re getting your information from. You’ll find plenty of websites willing to give you free advice, tips, tricks, suggestions, guides, and reports on which stocks to buy and which ones to sell. Always question their motivation for giving you said advice. Many times your instinct will alert you if something’s not right. Now we’re not saying that you should discount all the information you read, we’re just suggesting that you avoid letting other people do your thinking for you. If you do, the only people who will make money from trading penny stocks will be them, not you.

That naturally brings you to the next pitfall to avoid: thinking that making money with penny stocks is easy. Just like anything else that’s worth it, it will require that you spend some time learning it before you eventually master it. Some people get lucky and buy shares of a company that goes on to become an industry giant, and those shares turn those people into millionaires. But you need to understand that this is not something that happens all the times, and that the chances of it happening to you are pretty slim. Never get into penny stock trading with the assumption that you’re going to get rich overnight. Instead, try and use it as a source of income that you will grow over time to achieve wealth.

Make sure you don’t rely on a broker to help you pick your stocks. Your own decisions, instincts and research are what matters most. It’s YOUR money after all, and nobody cares about it more than you do.

While this is a fine list of mistakes to avoid, none of them can be more devastating than this final one: investing money you can’t afford to lose. Even if you follow every other advice, neglect this one and one mistake can wipe you out. Conversely, even if you ignore every other advice but this one, you won’t be ruined financially because you haven’t invested money that was critical to your survival and that of your family.

Always keep in mind that trading penny stocks is as risky as it is profitable. You can make a killing, or get killed. So before you invest in any specific company, be mentally ready to lose that money in case things don’t pan out. That’s not to say you can’t make money, because you can. This is simple, sound financial advice.

© Mistakes To Avoid When Trading Penny Stocks

How To Find The Best Penny Stocks To Watch

Everyone knows that penny stocks have an enormous potential when it comes to making money while investing a small amount of money. Buying a stock for less than $5 (that’s the maximum price of a penny stock) and watching it soar to $20 or more means that you can really make a lot of money. There are many many penny stocks out there though, so how can you make the difference between the penny stock that’s set to explode (and buy it) and the one that’s going to tank (and avoid it)?

What you want to find is a penny stock whose value shots up in a relatively short amount of time, so you can quickly sell back your shares and make a profit with a short turnaround. That’s why penny stocks are favored when day trading because day traders, by definition, are looking for quick profits. Even if you’ve never invested in the stock market, you too can learn how to harness the profit potential of penny stocks.

Some penny stock traders have been successful in this business because they’ve been using stock market trading software that crunches vast amounts of data and gives recommendations as o what stocks to buy at a given moment and which ones to sell. This gives the beginner penny stock investor a good chance at actually making money in the stock market. The reason why those programs are popular is that they give you an edge. You can take their recommendations and then do some more thorough research in order to decide which penny stocks to pick so you can make the most money with the amount that you’ve set to invest.

Stock market trading software is not really rocket science. All they do is incorporate a lot of data on the historical behavior of stocks and compare it to what is happening in the stock market at a given moment. Based on that, the software can deduce, judging by historical evidence, a probability that such and such stock will go up or down. Of course it’s not an exact science, but after all neither is meteorology. Stocks behave in certain patterns and that’s what stock market trading software tracks to give recommendations.

Individual stocks exhibit certain patterns and these programs look for similarities between current stocks and those that have performed well in the past. When they spot them, they bring them to your attention. You stand a much better chance to make money with a stock that is behaving just like a previous winner. This is in sharp contrast with shooting in the dark and hoping that your pick will make you money.

There are many different stock trading programs to choose from. Be sure you pick one with a money back guarantee, so you can be sure that it fits your needs before you actually buy it.

© How To Find The Best Penny Stocks To Watch

Tips On How To Make Money In The Stock Market

Lost of people would love to make money in the stock market. After all, there are a lot of success stories on how people have come out of very precarious financial situations and have become incredibly successful using the stock market as an investment vehicle. That is not to say that they did this overnight, nor that they didn’t learn (through trial and error) what works and what doesn’t. So before you embark on your quest to find the next stocks set to explode, do yourself a favor and start learning about the stock market, how it works, and most importantly, how people who have made money have built their success.

1. If you want to make higher than average returns, you need to find undervalued companies. These are companies that are financially sound, but for whatever reason their stock is selling for way less than it should. If the company is sound, well-managed, and has prospects for growth, grab its stock while it’s cheap!
2. Take a sector, or a cross section of a sector, and look at the P/E ratios (that’s price over earnings) of the companies in that selected group. If you spot a company whose P/E ratio is significantly lower than that of its peers, investigate immediately. There’s the possibility that it could be a hidden gem.
3. In this day and age of 24/7 coverage of the financial markets, networks need a steady stream of news to deliver to their viewers. That means that news is often amplified, and the markets usually overreacts. So bad news can cause a stock’s price to fall way lower than it should, and that may be a good time to pick up an otherwise sound stock.
4. A company is only as good as the team that’s managing it. Pay attention to the managerial team. Find out what companies they’ve managed in the past and what their track record of success and/or failure is.
5. Analyze the company’s fundamentals. Indicators of good health are (among other things) a good balance sheet, low debt loads, active cash flow, consistent profits, and (to a lesser degree) regular payment of dividends). Those are the companies you want to invest in.
6. You can’t be a good investor if you don’t know what your goals are, otherwise you’re just shooting in the dark. You should have a stop loss limit to each stock in your portfolio. Have a “waiting list” of potentially good stocks to include in your portfolio. Underperforming stocks should be weeded out and replaced with the ones on your waiting list.
7. Regularly read the quarterly reports of the companies you’re investing in. Have a good grasp of the company’s competitive edge in regards to its competitors and the evolution of the market in which it does business
8. When in doubt about a specific stock, do more research. Avoid the herd mentality of buying or selling when everyone else is: it’s the best way to buy when the stocks are overpriced (because everyone else is buying) or to sell when stocks are undervalued (because everyone else is selling).
9. The best way to make money in the stock market is with a plan. You won’t make money if all you do is gamble.
10. A good investing plan includes investments with different time frames: short, medium, and long term investments. Each of those time frames demands a different approach to assessing risk. Ideally, you should have a 60-30-10 allocation of your investing funds. That means, 60% should be in long term investments, 30% in medium term, and 10% in short term.

© Tips On How To Make Money In The Stock Market