Penny stocks have a very mixed reputation, and part of that is from not tackling then with a full understanding of what they are and how they need to be approached. Penny stocks can be an excellent way to gain investing experience, especially since making money off of them consistently requires understanding charting patterns and technical analysis – things too few investors bother to learn when it comes to the general stock market.
Read on to learn what you need to know about gaining investment experience by trading penny stocks.
No Penny Stock Will Be The Next Microsoft
The biggest mistake is to hold a penny stock for the long run. None of these companies are going to be the next Microsoft or Amazon. Remember how even Google and Facebook started at $80 a share and up? Penny stocks are in that category because on the big scale of things they’re not great companies. If you’re the type of investor who wants to pick and hold for the long-term, you don’t want to deal in penny stocks.
These aren’t like common stocks. Money is going to be made by recognizing patterns and being able to invest for short times and jump out during a favorable trend or short them before a reversal. None of these are going to make a fortune by buying and holding.
Learn Shorting From Specialists
While shorting can be a consistent strategy, and is seen by most professional penny stock traders as the best method for consistently profiting off of penny stocks, but learning how to do this the right way often requires training, a course, or mentors.
One of the big names online is Timothy Sykes, who has sold a class on how to do this but can back up his claims since he has and still does, make his money from trading penny stocks.
Don’t re-create the wheel: learn from those who have done it before.