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Are penny stocks worth my investment?

What is a penny stock?

The definition of a penny stock has changed over time. In earlier days, a stock trading below a dollar was considered a penny stock. Nowadays, there are different perceptions of what people consider a penny stock to be. For some, a penny stock is considered to trade below five dollars, for others under ten dollars. We'll refer to all stocks under ten dollars to be a penny stock for all intensive and educational purposes.

Are penny stocks risky?

Trading any asset in the market involves risk. Penny stocks are no exception. They are riskier because they are highly volatile. Volatility is what is so intriguing about trading them in the first place. When a stock is highly volatile, it means that the stock price has big swings in either direction. These big swings are what create significant opportunities for highly profitable trades. It is also why they are riskier since losses can be bigger as well.

Why should traders consider penny stocks?

Typically, beginner traders start with smaller accounts that range from a couple of hundred dollars to about one thousand dollars. If a trader with a smaller account would begin trading lager cap stocks like Amazon (AMZN) whose current price is over $2,000, they wouldn't afford it. Also, larger-cap stocks rarely move more than 2-3% in a day or sometimes even a week. On the other hand, penny stocks can move anywhere from 10% to over 100% in a day. For example, Spi Energy (SPI) moved over 4,000% in a single day!

How much money do I need to start trading?

Let me start by saying that it is a great time to be a trader. Ever since Robinhood introduced traders to zero commissions and no account minimums, it opened the door for aspiring traders of all skill levels and investment potential. Before Robinhood, most brokerages required a minimum amount of $2,000 to open a trading account and charged commissions ranging from $5 to $12 per trade. With high account minimums and commission prices, new traders didn't stand a chance to be profitable. Now, small account traders have plenty of brokerages with zero commissions and no account minimums to choose from. Some even offer a free stock just for opening a new account such as Robinhood and Webull. Traders can then sell the free stock and use that money to trade. I recommended that traders only invest an amount that they can afford to lose. If you are not ready to invest in the market but are looking forward to it, educate yourself first. There are many resources with great educational value, such as books and free YouTube videos. It would be wise to gather some money while educating yourself.

Get a free stock in Robinhood:

Get a free stock in Webull:

How can I trade penny stocks profitably?

To trade profitably, you need to ask yourself a critical question, how committed are you to succeed? If you are highly committed and determined to beat the market, you have taken the first step in becoming a successful trader. The market is unforgiving and relentless to traders who are ill-prepared. To trade successfully, beginners must educate themselves, develop a trading strategy, become disciplined, and most importantly, be emotionally and psychologically prepared. I believe that trading is 90% mental and 10% technical. I always tell new traders that planning is essential (10% technical), but the execution is critical (90% mental). Many beginner traders plan correctly but execute their plan very poorly. Beginners can correct this with discipline and emotional awareness. Trading mistakes are going to be inevitable, so traders must be resilient to failure. This is where the emotional and psychological aspects of trading become essential. Losses will deter weak-minded traders, while emotionally strong and psychologically healthy individuals will grow from their mistakes. What kind of trader do you want to be, weak-minded or mentally tough?

How can I start my trading education?

This day and age, the internet is easily accessible and offers access to many educational resources. There are many other ways to get started. For example, read books on penny stocks for beginners, watch YouTube videos, join a trading chatroom, join a free Facebook trading group, and the list can go on. All you need to do is commit yourself to learn without the fear of failure. You will succeed!

If you are reading this article, you are highly interested in learning about trading. Pennystocksclub13 offers a mentorship program to help you in the learning process. Check out what we offer through our PSC13 Elite Trades plan. Also, if you haven't done so, join our free PSC13 newsletter to receive educational articles such as this one directly to your email. Don't miss an update and sign up now!

Disclaimer: Results may not be typical and may vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk!

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