What does it take to buy penny stocks and profit from them? Are they all a scam? I've done my own research and here's what I've found!!
Everything you hear about buying penny stocks is that either you can make thousands of dollars or they are all a scam. I did my own research and monitored penny stocks that were experiencing large gains. I always tried to figure out what made the stock price jump so high. I found it was common to see stocks jump 100% or more every day. On occasion you would even see a stock jump 8000% IN ONE DAY!! This seemed unreal to me, but I soon began to figure out what made these stocks move and how to profit from them.
So what made these penny stocks move? Was it all the hype from paid penny stock promoters, was it for unknown reasons, or was it because of an abundance of novice penny stock buyers waiting to pounce on there next stock in hopes of making a quick buck? Many websites that claim to have the best penny stock picks and provide a list of penny stocks to buy are the ones that you should avoid. Some of these types of sites are paid to promote a stock. Sometimes they are paid in shares of the stock they are promoting and other times they are just paid large amounts of cash. The next time you come across a website telling you to buy a specific penny stock then check out the disclaimer page. It won't take long until you find a site that will tell you they are being paid in some form to promote a stock. The problem with this is that promoters can buy the penny stock before they begin promoting it and can quickly sell it off as the price begins to increase leaving you at a loss.
So this explains some of the price swings when it comes to buying penny stocks. At times I found price swings that were simply unexplainable and undetectable at the early stages. However, I found there was an frequent early indicator that could make a penny stock dramatically increase. That indicator is a press release or a news article sent out by the penny stock company. A press release is nothing new, almost all companies have press releases to disclose information to the public. The difference with a penny stock is that many times they are unexpected and at times will attract an abundance of buyers all at once, hence causing the stock to experience a large and usually rapid increase in price. I noticed these stocks would at times hang on to their gains and many other times would sell off rather quickly.
The thing that interested me the most on these stocks is that there was usually a window of opportunity between the time the press release came out and the dramatic price swing. This was not something I was used to seeing. I typically would only buy large cap stocks such as Bank of America, Caterpillar, Verizon, Goldman Sachs, and some of the other big names. My experience with these types of large cap stocks was that the second the news was released their stock prices would immediately rise or fall leaving almost no chance for the "at home" investor to buy stock before the price move.
For one to buy penny stocks it can be quite the daunting task. Who do you trust and what strategy do you use? Many investors see the big penny stock price swings and think they will buy penny stocks like they would any other stock (as did I). After making a few mistakes and losing my hard earned money, I soon learned that buying penny stocks would take a different technique. So I opened a free practice account at WallStreetSurvivor.com and started placing practice trades. My next problem was finding a good penny stock news scanner. After searching for awhile I came across stocklur.com. This site allowed me to search for news by stock price and stay on top of my trades. From there I was able to practice what I had found and make some great trades.
Today, I buy penny stocks more than any other type of stock. I found that I was able to obtain higher gains with less money and less time. Now, I'm not recommending that you go out and start buying penny stocks. Penny stocks are typically known to be more risky than large and mid cap stocks so I recommend you stick to practice trading for now.
