The Secret To Making Money From Penny Stocks
Penny stocks. What’s the automatic reaction when people hear these two words?
“Don’t invest in them.”
I agree. Do not invest in them. What I mean by investing is buying shares of a penny stock and holding them for a long period of time (months/years) in hopes of having the price/share go up.
The majority of penny stocks do not hold their value over long periods of time. Don’t get me wrong, there are some penny stocks that have shown enormous increases in price over a long period of time, but they are too far and too few in between.
So what’s the solution? How do you make money from penny stocks?
You make money by day trading penny stocks.
What’s day trading?
Day trading is simply buying and selling shares of a stock on the same day.
But why would you want to day trade penny stocks?
Because that’s how you can make the most money in the shortest amount of time!
Penny stocks display the greatest daily percentage gains than any other stock on the market. Gains of 50-100% everyday are not unheard of. Here are some real life examples to illustrate my point.
02-09-2006 – AXIGE – 272%
02-09-2006 – VPER – 200%
02-13-2006 – PAPO – 136%
02-13-2006 – CKEI – 184%
02-14-2006 – PTSH – 366%
02-14-2006 – IELM – 115%
02-14-2006 – CSUA – 111%
02-15-2006 – LAMP – 149%
02-15-2006 – CTUM – 133%
02-15-2006 – JKRI – 116%
02-16-2006 – SEVI – 225%
02-16-2006 – RSMI – 93%
In just 5 days, you would’ve had 12 opportunities to potentially double your money!
In order to maximize the potential from these high percentage gains, you would day trade these penny stocks. You see, by day trading, you don’t run the risk of watching the stock price go down over the long term. You just buy and sell shares on the same day, sometimes even within hours and lock in your profits! You don’t have to worry about your stocks overnight because you’ve already sold them and made money!
That is the secret to making money from penny stocks. Just buy the shares, ride the increasing percentage wave, and then sell the shares at a higher price to make your profit.
The reason why so many people are not aware of this secret is that they immediately turn a blind eye to penny stocks. They don’t even bother to investigate how to make money off of it since their first impression of penny stocks is usually a negative one.
Those who keep an open mind and take the time to learn about penny stocks will discover their enormous potential for profit.
However, it’s not as simple as choosing a penny stock you think will do well. There are numerous factors that you have to look for, as well as several traps to watch out for. Taking the time to learn by reading and studying all you can about penny stocks, as well as paper trading (trading with fake money) to gain experience will help you succeed in making profits.
A lot of people view day trading as risky. However, if you think about it, the more knowledge and experience you obtain, the less risk you incur.
For example, if a person who has never gone snowboarding before was dropped on top of a mountain, his risk of making mistakes would be high. However, if he spent time on the bunny slopes learning and training, that same risk would be reduced significantly. The same thing applies to day trading. Taking the time to read and practice will greatly reduce the risks.
The beautiful thing about day trading penny stocks is that your analysis to determine which penny stock to day trade with is not as complex as the analysis done to determine which penny stock to invest in for the long term.
The analysis required to determine which penny stock to invest in for the long term requires a great deal of fundamental and technical knowledge. What’s the company’s PE ratio? How do their balance sheets look like? How’s their cash flow? (finding this information is even more difficult for penny stocks as some penny stocks do not have any earnings or revenue). Is the industry they’re in thriving? Who are their competitors? How are the support and resistance levels? What about candlestick charting analysis? Are they on an uptrend?
However, analysis done to determine which penny stock to day trade with only requires a few things to look out for such as buying pressure and volume, among other things. Remember, you’re literally buying shares at 9:34 AM and selling at 10:18 AM (just an example to point out the brevity of the situation). You don’t need to do huge amounts of analysis.
The real secret to making money from penny stocks is to day trade penny stocks. That way, you take advantage of the daily huge percentage gains that only penny stocks display.
About the Author:
Jason Brook is the author of The Ultimate Step-by-Step Guide to Day Trading Penny Stocks. His website can be found at http://www.daytradepennystocks.com
Read more articles by: Jason Brook