What I learned from Trading Penny Stocks for a Year

What I learned from Trading Penny Stocks for a Year

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You know how most people make a new year resolution and try to follow through with it?

Well, one of mine was trying to make money through trading penny stocks.

I was always interested in stocks and the idea of using money to make more money really appealed to me.

It all started back when I was a Sophomore in college and my degree was in Economics (before that I was a pre-med major – that’s a long story).

I interned at Morgan Stanley and the man who was leading the internship spoke about how one of the best ways to make money is to use your current money.

He then went on to reiterate that each dollar was a soldier and the best way to maximize the potential of each dollar was to put that dollar to use.

It was a sound idea but there was one crucial missing element.

I didn’t know how and I wasn’t the only one.

But I was definitely interested.

This sparked a long journey of me trying to learn everything and anything related to investments AND building wealth with your current money.

But I never took the plunge.

I was too scared to jump into the unknown and there was no one to guide me or to coach me.

6 years later, I decided enough was enough (Anyone watch Last Holiday?).

Time to take the plunge.

2018 was the year I decided to give it a shot.

My Journey

1. How I started with Trading Penny Stocks

2. Platforms I used

3. Successes/Failures

How I started with Trading Penny Stocks

I have to admit I was afraid of losing money. Who wouldn’t be?

There was no guarantee that you wouldn’t, especially if you try trading in penny stocks.

But so many people vouch for their success in such a low capital way of gaining additional money.

I was sorely tempted to try.

So, like many others.

I researched.

I googled “how to make money trading penny stocks.”

I read how to pick penny stocks.

I opened a TD Ameritrade account because it was offering free trades if you funded it with 3k (Take it from me. Don’t do this unless you are comfortable losing 3k.).

Because of how afraid I was of the unknown, I joined a facebook group that was promoting a penny stock trading community.

I also joined a Discord group with a chat channel of everyone aiming to earn money.

I read how to read charts (aka technical analysis).

I watched youtube videos about “how to make money trading penny stocks.”

So on and so forth.

If you can name it, I probably tried it.

It wasn’t until I actually started trading that I learned.

Many people vouch for trading with paper money and I was one of them.

My thinking process was: don’t trade live money until you are comfortable with trading paper money.

But of course, the environment between the two are totally different.

You don’t feel the same emotions when trading paper money. I felt that I learned the most about myself when I’m in the driver seat trading actual money.

But by no means am I discounting trading paper money. It definitely helps when you are unfamiliar with the platform and not sure how the orders work.

Limit orders, market orders, stop orders, etc.

I highly recommend you get comfortable with how those orders work before you jump into the live environment.

Otherwise, trying to figure out how the orders work while being in a live trading environment just adds unnecessary stress.

So I took some time to acquire knowledge, through research and learning.

Then I decided to take action because reading, researching can only get you so far.

Platforms I Used

There were two platforms I used. Etrade and TDAmeritrade.

I used TDAmeritrade a lot more because when I signed up, there was a promotion of free trades with the funding of 3k into the account.

The trading platform for the laptop was also very nice to use even though it could be intimidating at first.

Login screen for the app looks like this:


Then the main charting section of the app looks like this:


Even though TD Ameritrade has a much higher learning curve, the tools are super useful.

You can draw support and resistance lines and view the chart on a daily, 30 minute, 4 hour and other time instances.

As for Etrade, I didn’t use it as much as TD Ameritrade.

I thought the charting functionality wasn’t as great.

But arranging orders on the Etrade website was much easier than setting up the orders on the TD Ameritrade app (also called ThinkorSwim).

So if I had to tell someone which one to choose, it depends.

If you’re willing to learn more about using more complicated platforms, then go with TD Ameritrade.

But if you’re uncomfortable and want someone more simple, go with Etrade.


Here’s the million dollar question.

Was I able to make money?

The short answer is YES.

It’s not a get rich quick method but if you can remember just ONE thing from this post, please remember this.

Yes, you can make money trading penny stocks.

Whether or not it’s sustainable and how consistent you will be depends on YOU.

Believe or not, emotions are a big factor in how successful you will be in trading.

I was able to make some quick wins but then I lost money due to beginner mistakes and emotions.

Here was my approach that helped me win $200-$1,000 with 1-2 trades:

  1. Find a stock ticker symbol
  2. See if it has potential to go up or down
  3. Buy the ticker
  4. Sell HALF at double the price
  5. Sell the REST at another price higher than the initial price

Find a stock ticker symbol

There are a lot of approaches to finding a stock ticker.

Some swear by a list that is generated by a scanner with a list of parameters from their trading platform (and TD Ameritrade is highly customizable with its scanners).

Some subscribe to a newsletter that has a list of tickers they think will have potential.

Others just follow with a group or channel that has tickers shouted out.

As you can see, it’s relatively easy to hear about a ticker but determining whether or not it has the potential to go up is a different story.

I say potential to go up because most traders like you and me cannot short a penny stock (meaning predicting it will go down).

So you are only evaluating it for the potential to go UP.

Okay, now you have a ticker symbol, the fun part begins.

This is the part where you evaluate a penny stock.

See if it has potential to go up or down

Start with this website called OTCMarkets.com.

It’s like a directory for all penny stocks. You will get most of the information you need here.

Look up the ticker and see if there are any recent news.

No news, move on to another ticker.

Repeat this exercise until you have about 5 tickers you want to buy.

Now formulate the plan you have for these 5 tickers.

Save it in Evernote, write it on a post-it or notebook.

Whatever works for you. But the KEY is to follow your plan so your emotions won’t take over.

In your plan, outline the conditions for buying the stock, what price you will be buying it and at what price you plan to sell it.

Also document the price you plan to sell it for a LOSS in case it goes the opposite direction.

Normally, you can use stop loss orders for regular stocks but not in the penny stock world.

There are market makers (aka banks/institutions) who will purposely trigger your stop loss to get you out of a trade.

So DON’T USE STOP LOSS ORDERS while trading penny stocks.

BUY the Ticker

Now all this planning will go to waste if you don’t actually BUY the ticker right?

So when the market opens at 6:30am PST, place a limit order to buy the stock you want at the price you determined from your plan.

If all goes well, the price will climb the same day or in a few days depending on how recent the news was.

Some penny stocks move really quick and some do not. It depends on how good the news is and how many people know about it.

Sell HALF at double the price

When you originally bought the ticker, there was a cost associated with buying the sticker.

That is your cost.

So, when the price doubles, you should collect and secure your gains and at least recover your initial cost of buying it.

Too many traders get greedy when the price spikes and then forget to lock in their gains.

Then they are stricken with remorse about how they could have gotten X amount of money.

This is very important so I repeat again. LOCK IN YOUR GAINS.

Sell the REST at another price higher than the initial price

If you’ve reached this stage with a particular stock, congrats!

You’ve secured your gains and now it’s a matter of closing out your remaining position.

At what price should you sell the rest? Well, here’s where your initial plan comes into play.

If the price continues to climb UP, then you should sell at the next price level you’ve determined in your plan.

If the opposite happened, then you should sell as quickly as possible to exit out before the stock tanks sharply.

Thanks for reading this far, I hope this was helpful in showing how trading penny stocks can make you money.

Now, I’m going to discuss my failures.

And there are 3 main ones I’ve experienced that caused me BIG LOSSES.

  1. FOMO
  2. GREED
  3. NOT Sticking to the PLAN


First one is FOMO (Fear of Missing Out) and this is probably the number ONE mistake beginners new to penny stock trading fall into.

So many traders are EAGER to make money. I was too.

And when you’re in a group chat/facebook group etc. where people share their successes, you can’t help but feel that it could have been you making $200 or an extra $500.


I say that but most people do. They can’t help it.

Try to take a step back, calm yourself and then tell yourself that there will always be another ticker and there will always be another opportunity to make money.

Learn to let it go.


This is also another big mistake beginners fall into.

Holding out on a stock thinking it will have more gains.

Then before you know it, the stock TANKS like this.


See where the orange box highlighted section is?

If you were one of the traders holding onto the stock then, the next day you would be devastated!


NOT Sticking to Your PLAN

This advice and the previous advice go hand in hand.

If you had a plan and stuck to it, then normally you wouldn’t be stricken by greed.

Unless you don’t follow your plan because it’s not written out in front of you.

That’s why you should find a system that works for you.

Phew, this was a pretty long post but I hope this was helpful.

Share your thoughts and comments below!

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Hi there! Creator of Matcha Financials. Former accountant passionate about finding ways to put money to work. I firmly believe that there is more to life than the 9-to-5 grind so make money for you. NOT the other way around!
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