So you’ve probably heard that penny stocks can be a great way to make some extra money.
Especially when it doesn’t take that much money to start out.
But how do you actually make money with penny stocks?
Well, you’re just in luck because this post will discuss in detail!
Before we begin, for those of you brand new to penny stocks, let’s start with the basics.
But if you’re more experienced, please feel free to jump around!
TABLE OF CONTENTS
What are Penny Stocks?
The formal definition of a penny stock is any stock priced below $5.
These are stocks of small companies hoping to make it big one day so they’re not as established.
Compared to the bigger companies like Apple, Facebook, Google, etc.
But they have the potential to do so.
So these stocks are definitely more volatile than bigger board stocks.
And there’s a LOT of money to be made.
Now, if you’re intimidated by volatility, don’t trade stocks.
There are other ways to make money with stocks.
That are a lot less volatile.
Like dividend investing. Which we will discuss another day for those of you interested in this topic.
But for those of you that are not intimated by the thought of volatility.
Let’s jump right in!
Picking Penny Stocks
So how does one even begin to make money with penny stocks?
It first starts off with finding the right penny stock tickers.
The ones that have potential to rise in value. Because in the land of penny stocks, you usually buy low and sell HIGH.
So pick bottom feeders that have the potential to double or more.
Oops, I started to use some trader slang language.
“Bottom feeders” is a term for stocks priced wayyy too low.
Okay, great. So where do we even start finding tickers to start trading.
After all, how do I know something has potential?
Good question and the answer is almost anywhere.
Tickers from Social Media
Almost everyone is on social media nowadays and it can be a great place to brainstorm ticker symbols.
With one caveat.
Don’t blindly trust the individuals calling out the tickers.
Because you need to do your own research FIRST.
Just because someone on social media claims to have done all the research for your convenience.
Have a healthy dose of skepticism and check the work done.
Because at the end of the day, it’s your risk and money that’s at stake.
Tickers from Scanners
Here’s another way that most traditional traders find their tickers.
Using stock scanners.
Now with internet and the wealth of information at your fingertips, some scanners are on a website.
For ease of access.
Such as FinViz. This is a great website tool to help screen for stocks.
Plus, it’s FREE.
I like to use the “technical scanner” details under the screener option.
And look for items with more than 30% price fluctuations.
After putting in the settings, the tool will screen for tickers with this setting and give you a list of tickers to research.
Super convenient right?
MindSet for Success
I hope you’re not under the impression that trading penny stocks to make money is a get rich quick scheme.
Let me tell you right now.
It takes dedication and time to master this skill.
But the rewards are worth it.
Too many individuals jump in without understanding the risks of trading these highly volatile stocks.
Thinking it’s super quick to become rich.
So having the right mindset will separate you from the rest.
Set your expectations right and you’ll go far. Even if it takes some time.
Locking in Profits
Now this one may be common sense, but believe me so many new traders make this MAJOR mistake.
Too many traders get into a stock and then forget to lock in profits as the price continues to take off.
Then the price pulls back and heads in the other direction.
Frustrated, those traders sell at a loss and claim to never trade stocks again.
Don’t be that person.
Lock in your profits as the price rises!
Here’s another honest truth: you won’t always be making money.
So you need to know when to cut your losses.
It’s just something you HAVE to learn how to do.
Especially if you’re looking to make money with penny stocks.
If you don’t cut losses as soon as you can, you will be bleeding your account dry.
Finding the Right Support Group
Sometimes have the right support group helps you further in your trading career.
But it can be a double-edged sword.
Because you can follow others with what they are trading without actually performing your own research.
So take the support group for what it is: an additional source of information.
Facebook groups are a great way to meet other like-minded individuals to share tips and tricks.
Just log into Facebook and search for a “penny stock trading” group, there are several out there!
And it may take time to find the right one for you.
Keeping a Trading Journal
As I have mentioned previously, trading penny stocks takes some time to master.
So don’t be afraid to make mistakes.
And LEARN from them.
What better way to do so than to jot them down and reflect on them?
So keep a trading journal.
Write down your thoughts on why you entered a stock position.
Was it through social media rumors, your research, etc?
Either way, don’t forget to write it down!
You will set yourself up for success if you do!
Mastering a Skill Takes 10,000 Hours
I can’t reiterate on this enough.
Trading penny stocks to make money is a skill that will take time to learn and master.
Have you heard the saying that it takes about 10,000 hours to learn a skill?
Well, not to intimidate you but it may take about 10,000 hours before you can consider yourself a great trader.
So don’t rush it.
Take the time to truly learn the ins and outs of trading.
If you need a little more help, download a copy of my FREE Trading Plan Template!
It will help you set yourself up for success.
What was your struggles when trading penny stocks to make money?
Let me hear your thoughts below!