Penny stock trading tips – tricks and traps

Penny stocks, the easiest way to gain money?

Penny stock trading for beginners can be very lucrative, but also very frustrating.
The average beginner starts with penny stocks because they are cheap. If you have only a small trading account, you can buy a lot of shares.

Let´s say your trading account is very small: 1,000 US$.
You find an interesting share with an price of 0.10 US$ / share.
Price / share: 0.10 US$ * 1.000 US$ = 10,000 shares.

Now comes the trick. Because the stock is so cheap and increase of only 10 Cent (0.10$) would double your money.

Buyprice: 1,000 US$ (0.1$ * 1000$ = 10,000 Shares)
Sellprice: 2,000 US$  (0.2$ * 10,000 shares = 2,000 US$)

Profit: 1,000 US$

If you trade a “normal” stock, the price per share is between 50 and 500 US$. Let´s say you buy a stock for 100US$ / share.
Now the price increases the same amount: 0.10 US$

Buyprice: 1,000 US$ (100$ / share * 1000$ = 10 Shares)
Sellprice: 1,001 US$  (100.1 $ * 10 shares = 1,001 US$)

Profit: 1 US$

How to find an interesting penny stock

Penny_stock_PWAVQ_1MinYou have many sources to find interesting penny stocks.

  • First of all you can ask the internet (google, bing, yahoo).You can read some newspaper (business insider, economist, bloomberg)
  • You can also subscribe some investment letters which are specialized for penny stocks.
  • You can look for your own at the opening gap for penny stocks. If the is a big gap you can jump on and use the move in your favor.

As you can see in the picture Powerwave Technologies had an opening gap at 12/09/2012. This is connected with a increase in Volume.
In this example, you could enter the trade for 0.4$/share and exit for 0.625 / share.

Buyprice: 1,000 US$ (0.40$ / share * 1000$ = 2,500 Shares)
Sellprice: 1,500 US$  (0.60 $ / share * 2,500 shares = 1,500 US$)

Profit: 1500 US$

Another penny stock trading tip – the other way around

This time I encourage you to think the other way around.
Above I mentioned the method to subscribe a newsletter specialized for penny stocks. Let´s image that someone of this writer wants to improve his income. What would he do? For example, he could buy a penny stock in advance. Later he will publish that this company is a hidden gem and that you should buy it. Most of his subscribers will buy the stock. That´s the reason because they subscribe, isn´t it?
Now we have a lot of demand and the Volume and Price of the stock will increase. The publisher will sell his recommendation for a good price.

How to profit from this inside?

You can scan the penny stocks for higher volume without an increase in price. The publisher buys a lot of shares, but the daily volume is very low. So you will see some days with a bigger volume without any increase in price. Then you buy this stock and wait. Some days later someone will announce that he found a hidden gem and the demand (volume) and the price will increase. This is the right time to sell.

What do you think?

Leave a Reply

Your email address will not be published. Required fields are marked *

*