Blog : 3 Tactics to Penny Stock Profits
by Peter Leeds on March 16th, 2015
If you are looking to turn a small investment into something more, penny stocks are a great way to do it. That is, if you go about things the right way.
In our decades of experience, we've found that 3 tactics above all others can mean the difference between losing cash and pretty significant profits.
Tactic 1 to Penny Stock Profits
This tactic actually applies to any and every type of market investment, not just penny stocks. You should (in our opinion) always use stop loss limits. In other words, live to fight another day.
Remember, even a psychic will make losing calls lots of the time. The ones who emerge with a tiny loss + a huge lesson will always dramatically outperform those who stay on the boat all the way to the bottom.
As soon as your penny stock investment starts to slip lower, dump it in one motion (just like taking off a band aid).
Typically, most falling penny stocks will just keep sinking. However, even if they spike, that isn't an actual loss. It is an opportunity cost - no more than a loss on paper. Yes, the downside is that you unloaded your position, then the shares immediately reversed higher.
However, even if the penny stock you sold went to millions of dollars, it doesn't actually cost you a dime. Even in such an unlikely event, you are still in the investment game, and can look for the next big winner.
Getting out quickly when the shares turn against you is the mark of a profitable trader. Hanging on as the penny stock sinks is a common trait among investors who lose.
Tactic 2 to Penny Stock Profits
The vast majority of investors do not even know about the underlying company's financial position, or fundamental strengths, or even who makes up their leadership team (CEO, Executives).
Investors who understand the following aspects of the business will be significantly better traders of the shares.
- the company's market share (how big, and is it growing?)
- barriers to entry to their space
- what have the Executive team done in their previous ventures?
- how much does the company own and how much does it owe?
- are the revenues growing, and how fast?
- what are the management's expectations for next year? The next five years?
We could go on all day about analysis in tiny shares, but we cover it all simply and clearly in Penny Stocks for Dummies (video below), and frequently in our official penny stock blog.
Tactic 3 to Penny Stock Profits
Consider the source. Where are you first hearing about the investment?
If it is from a free source, like anything online (forum, website, e-mail blast), or word of mouth, or a pamphlet in the mail, you would be foolish to buy shares.
When it comes to penny stocks, they just scream for dishonest promoters to mislead you into buying so the prices drive higher. The promoter then sells and the investment returns to it's realistic value... which is much lower than you bought it at.
No offense - you are not so special or important that a realistic, financially secure company needs your investment in their shares. Free penny stock promoters drive fancy cars if they can dupe you.
Are you the source of your own penny stock investment ideas? That is totally great! You are the only person you can trust. Just be honest with yourself - if you aren't doing well at it, maybe stop...?
There are in fact some trustworthy sources of penny stock picks, but only a few in our opinion. Typically, getting selections from a paid source with a long term track record of success will give you an advantage. Just make absolutely sure they have never accepted money in exchange for promotion of any shares, and they have a 100% Unbiased Guarantee.
From everything we have learned from our successes over many decades, these 3 trading tactics stand out above everything else when it comes to trading penny stocks well. Investors who understand and abide by the approach listed above will almost always dramatically outperform those who don't.
As of January 2017 we no longer publish the blog and it has been removed from the webiste menu.
You are reading this old blog entry because we still like to reference it. :-)
You are reading this old blog entry because we still like to reference it. :-)
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