Penny stocks are tricky because they change daily, and there are thousands of them. So, how do you find out which ones are the best?
Tips for Finding the Best Penny Stocks
As you do your research, you will find that each trader has their own method, and unfortunately, you will have to find which one works best for you. I want you to know upfront that it will take time, lots of studying, and patience.
Let me give you a few tips to help you get started:
1. Understand what penny stocks are
Penny stocks are stocks that trade under $5 a share. Some for even less! The companies that make up these stocks are small, volatile, low-volume, and extremely high risk. Don’t let this scare you though. There is the potential for very high earnings when done right.
Penny stocks work both the traditional way of selling as well as short selling. Ideally, you don’t want to hold onto a penny stock for long. I would even say to hold onto a penny stock no longer than a day. You will find some that you can trade and make money on in a matter of minutes.
2. Read up on the latest market news
A good way to understand which penny stocks are worth looking into is to go onto social media. Sites such as Reddit and Twitter are loaded with people discussing what is hot in the stock market right now. Once you have learned which companies everyone is talking about, dig deeper and research the company yourself. Knowledge is power!
3. Make a watchlist
Every trader has their own watchlist, and you will want to come up with one for yourself. This is a list of companies that you are keeping an eye on. You might want to include notes, such as the history of the company, recent announcements, recent spikes, and drops in stock.
This will allow you to see the company’s overall performance and be able to better project how it might do in the market. Also, when looking into companies remember that volatility is not your enemy. When it comes to best penny stocks, you will want stocks that are spiking. These are easy and fast trades. This is what you want.
4. Be patient
Remember, penny stocks change daily. New companies pop up every day, and companies that have existed for years sometimes fail. It is just how things work. What matters is that you are diligent in your research and stay on top of the latest trends.
5. Consider getting a mentor
Finding someone who has experience in trading penny stocks will save you a lot of headaches in the long run. They will be able to efficiently guide you in regard to what works, and what does not and will help you avoid all of the pitfalls they had to go through.
Penny stocks can seem challenging to get into at first and can seem a little scary because of the risk involved. Just remember that with the proper research and care, you can benefit greatly.