Learn How to Get Started In Penny Stocks

Abstract of Penny Stock Trader
••• Boris Lyubner

You can get started in penny stocks quickly and simply. I promise you that it's easier than you think, it is a lot more fun, and you can make some serious profits as well.

Of course, there are risks - the first step is to avoid these dangers and preserve your capital. The good news is that it is incredibly easy to sidestep the pitfalls while focusing on low-priced investments which are going to increase dramatically in price.

Quite simply, success comes down to understanding that stock market investments are simply shares in the underlying companies. When those companies do well, by increasing revenues, or capturing more market share, or growing in size… the share price typically follows suit by increasing.

Investing in penny stocks is actually very similar to buying stock in a massive company such as IBM or ExxonMobil. It's just that the share price is lower and usually more volatile, and often the company which they represent is much smaller, newer, or undiscovered.

However, if you know what to look for to find the great companies which are still at low prices, your investment dollars can multiply many times over.  Then when they do move higher, they often do it in a relatively short period of time.

What Penny Stocks Are

Penny stocks are shares which trade for $5.00 each or less. As such, there are actually a lot of massive multibillion-dollar companies which fall into the penny stock category. Take Ford Motor Company for example, when it was training for $1.87 per share, as just one example.

There are also a lot of other companies which are or were technically penny stocks, and many of them are names you know, or might even be multi-billion dollar corporations.  Often, they are massive corporations on their way up (along with their share price)!

The thing about penny stocks is that many are on the major exchanges such as the NYSE, American Stock Exchange, NASDAQ, and the Bulletin Board.  However, there are also the smaller, more risky penny stocks which trade on the dark markets, such as the Pink Sheets, OTCQX, and OTCQB.

By avoiding the dark markets, and instead focusing on the high-quality companies which trade on the major exchanges, investors have already done most of the work to make some profits (while avoiding losses).  Stick to the best markets, and avoid free stock picks - in this way, you will manage all the risks and downside, while potentially capturing the upside gains of some of these up-and-coming companies.

What to Know About Scams In Penny Stocks

You have probably also heard a lot about scams and frauds in penny stocks. The thinly traded nature of most of the penny stock companies, plus their tiny size, affords dishonest players the opportunity to attempt to make money by trying to manipulate the prices of the underlying shares (and as such make a profit for themselves).

Of course, the only people who are vulnerable to such scams are those who will buy a free stock pick which they hear about, whether through a message board, the postal mail, or a free newsletter.  They read whatever dishonest hype the scammer pushes out to them, and possibly actually believe it!

It is NEVER a good idea to buy a penny stock that a promoter is talking about. No high-quality company needs a promoter to try to drive the price higher – great companies will increase in size and price on their own.

Why Penny Stocks Have a Bad Name

Most penny stocks have a bad name, but the majority of that negative connotation comes from people who have been burned by scams, as well as those who were fooled into purchasing low-quality companies. By focusing on high-quality companies, such as the ones which we show you how to find, it is easy to turn a small investment into something much more significant.

Trading Penny Stocks is Easy

It is not difficult to trade penny stocks. Simply avoid free stock picks, avoid the dark markets, and focus on high-quality companies such as the ones which we talk about.

By getting involved with low-priced companies when they're turning the corner when their business operations are starting to pick up momentum, the share price will typically rise pretty significantly, and pretty dramatically. If you can do that a couple times in a row, you've turned a small investment into something significantly greater, something which will have a major impact on your life.

Learn How to Get Started

Step One:  The first step to investing in penny stocks very well is to do nothing. That's right, do nothing.

Said another way, before you start investing real money and potentially taking losses, start by paper trading. Keep track of imaginary money in real stocks, and see how you would have done if you had traded actual dollars.

If you would have lost money, then you wind up having saved yourself those dollars.  If you would have made a profit, at least you know that you are doing things right.  Now, just apply those winning techniques with real money, and you should potentially do pretty well.

Step Two:  Then you need to either find good penny stock companies yourself, as we can show you how to do, or get some guidance from an authority who knows what they're talking about. 

Step Three:  When you begin investing, you are going to want to learn how to make the right kinds of trading decisions. We discuss many of our tactics on the Peter Leeds YouTube page, but there is also plenty of information on the Internet about different ways to trade stocks, and how to buy and sell penny stocks specifically.

The Best Approach to Penny Stocks

We found that the best approach is always to look for the highest quality companies, which just happened to be trading at low prices because they are small, or new, or undiscovered. Then we use technical analysis to discover some good buying prices for the shares so that we get invested into a really high-quality company at an undervalued price.

After that, it is just a matter of learning the business operations do what they do. I always say that good quality companies always rise to the top, and I believe that has been proven out through our successes over the years, ever since we originally began many decades ago.

A Summary of the Next Steps into the World of Penny Stocks

if you are at all like I was, you are probably anxious to put real money to work in some potentially high-flying penny stock. However, it might make more sense to approach this new venture very slowly.

If you learn how to do things properly, no matter how long it takes, there will be plenty of opportunities waiting for you at the end of your journey.  On the other hand, if you rush things and make mistakes, or have sloppy trades, you will get washed out pretty quickly... and probably be very discouraged, besides being very broke. So, learn as much as you can, and when you are ready, we will be here to help guide you along!