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Penny stocks are securities that trade around a price of five dollars and under per share and are usually OTC (over the counter) stocks. If you have read my “Learn to Trade in the Stock Exchange” series, then you got an idea of the basics behind universal trading methodology. Assuming you are familiar with some of the trading terminology and basic technical analysis techniques, these are my three easy methods to trade penny stocks for profits. As a disclaimer, I am declaring that this article is called three easy trading methods for quick profits, not three methods for easy profits. Penny stocks are highly volatile securities that are considered high risk by the mainstream financial networks, for their connection to the questionable businesses they represent, and the manipulators within the game that try to play them.
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All this set aside, penny stocks are where the big rewards are at for those who have smaller trading accounts, or those with large trading accounts who like to make quick lump sums of cash. I have discovered these three methods during my early stages of trading, and have reaped rewards from all three, and as I gained more experience I learned some of the tricks/tips involved with each that will help you do the same.
#1 The Promoter Method
The stock promoter method involves creating a list of popular promoters and following them on social media (Twitter one of the best). The stock promoters are individuals who build hype/support for stocks. I already covered the risks involved with playing a promoter’s game, but if you follow these promoters for a while, then you will get to know which ones are able to deliver and which ones cannot. These promoters are marketers for stocks. They will generally use mailing lists to blast out periodical promos, with the goal of generating enough hype/support to a particular stock, in sheer volume alone, to boost pps (price per share) in a short amount of time. Here are my top tips and tricks for using stock promoters to trade penny stocks:
· Sign Up for a bunch of newsletters
· Before hopping on the band wagon, you watch their picks and check the results for yourself
· Wait for volume to show up, you don’t want to be the first in, because campaigns can flop
· Don’t get greedy, get in, get some green, and get out (these fluff news promos can tank, fast!)
#2 The Newsday Method
The news day method is all about jumping into the trading action that is created from a security that posted a press release. If you have been using stock screeners to build your stock watch-lists, then it is not uncommon with pink sheet stocks that you can quickly accumulate a list comprised of hundreds of securities. That may sound like a lot of stocks to keep track of, but really with penny stocks you don’t need to get caught up with doing any extensive technical analysis and fundamentals can virtually be ignored (aside from share structure research). You will get to know which stocks are known to breakout, and which are more of the sleeping giants. The news day method is very basic, but can bring quick profits if you pay attention to your lists. Here are my tips and tricks for this method:
· Perform due diligence on stocks as you add them to your list (performers vs sleepers)
· Volume can be an indicator of action, but only if it makes sense from the share structure.
(Most penny stock shares outstanding are in the billions, so a stock trading hundreds of millions in volume can be an indicator)
· Check the press release for positive catalysts: reverse merger (rm), acquisitions, product shipments, earnings/sales, celebrity endorsements, stock split
#3 The Message Board Method
Message boards are my third method for creating quick profits trading penny stocks. The message boards can be a great resource for finding trade ideas, but it can also be very easy to get sidetracked. I visit a free to use site called InvestorsHub. This site can also be used as a sort of validator for your trade ideas acquired from method #2, by checking out what some other investors are saying about the news on the stocks. This can give you an idea of the trader psychology involved with the security. Here are my tricks and tips for using the message board method:
· Pay attention to any “trending now” or “Hot” lists
· Tune into boards where people are posting trading ideas, for more stocks you could add to a watch-list
· Watch boards that receive many posts
· Never buy a stock on a rumor of “upcoming news” or rumor of a promotional campaign (again, wait for volume)
· Follow some of the more popular members of the forums, who have been members for years, and watch what boards they are posting on or following. (These are usually the big fish players that have big money to move price per share and a big volume of followers who can bring attention to a stock)
The stock promoter method involves creating a list of popular promoters and following them on social media (Twitter one of the best). The stock promoters are individuals who build hype/support for stocks. I already covered the risks involved with playing a promoter’s game, but if you follow these promoters for a while, then you will get to know which ones are able to deliver and which ones cannot. These promoters are marketers for stocks. They will generally use mailing lists to blast out periodical promos, with the goal of generating enough hype/support to a particular stock, in sheer volume alone, to boost pps (price per share) in a short amount of time. Here are my top tips and tricks for using stock promoters to trade penny stocks:
· Sign Up for a bunch of newsletters
· Before hopping on the band wagon, you watch their picks and check the results for yourself
· Wait for volume to show up, you don’t want to be the first in, because campaigns can flop
· Don’t get greedy, get in, get some green, and get out (these fluff news promos can tank, fast!)
#2 The Newsday Method
The news day method is all about jumping into the trading action that is created from a security that posted a press release. If you have been using stock screeners to build your stock watch-lists, then it is not uncommon with pink sheet stocks that you can quickly accumulate a list comprised of hundreds of securities. That may sound like a lot of stocks to keep track of, but really with penny stocks you don’t need to get caught up with doing any extensive technical analysis and fundamentals can virtually be ignored (aside from share structure research). You will get to know which stocks are known to breakout, and which are more of the sleeping giants. The news day method is very basic, but can bring quick profits if you pay attention to your lists. Here are my tips and tricks for this method:
· Perform due diligence on stocks as you add them to your list (performers vs sleepers)
· Volume can be an indicator of action, but only if it makes sense from the share structure.
(Most penny stock shares outstanding are in the billions, so a stock trading hundreds of millions in volume can be an indicator)
· Check the press release for positive catalysts: reverse merger (rm), acquisitions, product shipments, earnings/sales, celebrity endorsements, stock split
#3 The Message Board Method
Message boards are my third method for creating quick profits trading penny stocks. The message boards can be a great resource for finding trade ideas, but it can also be very easy to get sidetracked. I visit a free to use site called InvestorsHub. This site can also be used as a sort of validator for your trade ideas acquired from method #2, by checking out what some other investors are saying about the news on the stocks. This can give you an idea of the trader psychology involved with the security. Here are my tricks and tips for using the message board method:
· Pay attention to any “trending now” or “Hot” lists
· Tune into boards where people are posting trading ideas, for more stocks you could add to a watch-list
· Watch boards that receive many posts
· Never buy a stock on a rumor of “upcoming news” or rumor of a promotional campaign (again, wait for volume)
· Follow some of the more popular members of the forums, who have been members for years, and watch what boards they are posting on or following. (These are usually the big fish players that have big money to move price per share and a big volume of followers who can bring attention to a stock)
