How to Trade Penny Stocks

how to trade penny stocksLast updated: 26 January 2017

How to Trade Penny Stocks

Many people sit and wonder how they can turn around their investment portfolio and get caught up on the trading basics. Once a person knows how to trade penny stocks, they can start to trade stocks immediately. There will be some initial capital that is needed to be able to buy the stocks, but once you learn penny stocks, this initial investment can provide ten times the profit.

When Should I Buy Penny Stocks?

Penny stocks can be purchased immediately, but without true guidance you can become lost among the thousands of stocks to choose from. We have learned through an immense bout of trial and error exactly how to buy penny stocks and more importantly – when. The answer to this question is rather complex.

First, you must go off of either research into a company that looks promising or buy based off of trends. The latter can be risky, but it is also very profitable when mastered. This is what has worked best for us over the years:

  • Look for trends: When a stock seems to be rising steadily, buy it in hopes of selling before it goes on the decline. This can be an increase based off of new financials or it can be an addition of a new product to the company’s lineup.
  • Buy off of news: A very risky way to buy is based off of company news. If there is an announcement that a company is going to make right before the holiday season starts, chances are that it is an unveiling of a new good or service. Buying ahead of time means a trader will be able to reap higher profits.

There are also sparse newsletters that provide picks of the highest penny stocks with true potential. While some of these lists are outdated, we provide our own to readers that will let them use our research and diligence to buy penny stocks that are truly going to rise.

How to Buy Stocks

Before you can begin to understand how to day trade, you will need to know how to buy stocks. A broker will be needed and will be an intermediary between you and the stocks being purchased. These brokers will ask for a commission or a flat fee for a trade, but they are essential to utilize.

These brokers can be found online and will all have their own benefits. Virtually every broker has a dashboard where users can view the market, see trends happening in real-time and make purchases whenever they see fit.

Now, you can setup the portal to buy in the manner which you like best. This will include buying at:

  • Market order: This is the current price of the stock’s shares.
  • Limit order: A limit order is a price in which you, the buyer, want to buy the shares at. When the price hits this limit, a purchase will be automatically made.

It is up to each trader to determine how long they should hold onto a stock. If prices start to dip, it is best to sell the stock at a max of a 10 – 15 percent loss. However, when the sale of stock needs to be made a “sell order” will be required. This will effectively sell the stocks you purchased. There are automatic limits that can be set for purchased stocks called “stop-loss” that sells a stock when it reaches a certain loss point.

Those that truly want to learn how to trade penny stocks have to understand that this is not a rushed decision. Real money will be exchanged and traders have to do their research to make a sound investment that will allow them to make a profit. Our free picks are a good starting point on the latest stocks and what we feel will be truly profitable for investors. Utilize our picks, do your own research and choose which one you think will be the most profitable.