Who Runs Penny Pro? Penny Stock Expert – Jeff Williams AKA “Stock Analyzer”:
The face of Penny Pro is a professional stock trader of over fifteen years, Jeff Williams. For the most part, Jeff focuses on penny and sub-penny stocks ranging from $.001 to $5.00, so his approach of trading legitimate penny stocks is a bit different from many other services out there that tend to shy away from tickers trading under $1.00. Sometimes, he even trades stocks under $.01.
Penny Stocks can broadly be defined as tickers that trade under $5.00, but you don’t often see traders zeroing in on stocks under one cent. There’s a stigma attached to penny stocks as being dangerous and that trading them is nothing short of gambling. But the fact of the matter is that penny stocks can provide massive growth potential for small portfolios, and that’s why so many individuals are attracted to them.
The #1 Advantage of Trading Penny Stocks:
Profit-Potential: Taking a relatively small $2,000 portfolio for example, the traditional long-term investing route won’t do much for your bottom line. This avenue might return 5-20% on an annual basis at best, which won’t get you very far in the grand scheme of things. Trading penny stocks, however, can often result in portfolios doubling or tripling (100-200% returns) within that same period of time. It’s really the only approach that can substantially build small accounts into big ones in a timely fashion.
Important Note: Trading penny stocks is NOT investing. These aren’t stocks you typically want to buy and hold onto in hopes that they become the next IBM, Microsoft, or Apple. They’re penny stocks for a reason – they’re speculative, have unproven business models, and oftentimes no profits. Yes, some will go on to become legitimate companies over time, but the majority of them eventually fail.
The right approach involves riding short-term momentum (hold times of approximately 1-5 days) in order to reduce risk, yet capitalize on extreme volatility. With the right education, research, and discipline, penny stock trading does not necessarily need to be dangerous or scary – as long as you follow the right set of trading rules. At Penny Pro, Jeff Williams teaches his members how to do just that.
As a Penny Pro Premium Member, You Receive:
Expert Video Lessons: Hundreds of hours of recorded video lessons and continued education webinars allow novice traders the opportunity to build a strong foundation in various penny stock concepts and strategies. Education simply cannot be overstated. Without it, you will fail – simple as that. So many people lose money trading because they don’t understand what they’re doing. Don’t be that person. Take the right approach that involves education, research, and discipline.
Interactive Chat Room: The focus of Penny Pro is on fast-paced day and swing trades, so Jeff spends much of his time teaching within the chat room: how to scan for trades, enter them, and then exit for a 10-25%+ profit – that’s the overarching goal. It also allows the community of traders to come together in one location, share high-potential trade ideas, and actively help newcomers get up-to-speed. Nobody can watch the entire market by themselves, so it helps to have hundreds of eyes watching various stocks and sectors for attractive setups.
Daily Watch Lists: Watch lists keep members focused on high-probability setups and don’t overwhelm them with too many options on a day-to-day basis. There are over 15,000 stocks available to trade each day on U.S. exchanges – Jeff Williams helps his members cut that number down to five or less. There’s no doubt that most of the hard work in trading comes from research, so Jeff does much of that work for his members so that they don’t necessarily have to.
The Takeaway: Becoming a consistently profitable trader requires hard work – don’t let anyone try to tell you differently. So many traders fail because they buy into “Simple Systems” that endorse “Hot Picks” when the actual focus should be on education and self-sufficiency. Just like anything else, there’s a learning curve for beginners when it comes to penny stocks, but it’s one that can be cut down substantially with the proper guidance of an expert like Jeff Williams and educational platform like Penny Pro.
What is Penny Pro Elite? Take Your Trading to the Next-Level:
Penny Pro Elite was launched due to demand from Jeff’s most committed traders as a service for taking their trading skills and profits to the next level. It’s a small group of traders looking for close personalized mentoring and unmatched education.
You can see firsthand “how” and “why” Jeff makes trades in order to reduce your own mistakes and improve trading efficiency. Here’s what you receive as a Penny Pro Elite member:
|
|
|
|
|
|
Penny Pro vs. Top Stock Picks (Comparison Chart):
| PENNY PRO | TOP STOCK PICKS | |
| Head Trader | Jeff Williams | Jeff Bishop |
| Ideal Stock Range | $.001-5.00 | $1.00-25.00+ |
| Main Focus | Penny Stocks | Stocks & ETF’s |
| Real-Time Alerts | Yes | Yes |
| Video Lessons | Yes | Yes |
| Watch Lists | Yes | Yes |
| Webinars | Yes | Yes |
| Chat Room | Yes | No |
| Beginner-Friendly | Yes | Yes |
| Free Email List | Yes | Yes |
| Mentor Service | Penny Pro Elite | No |
Failure is a Part of Trading – Admit Your Mistakes and Learn From Them:
Trading stocks is an undertaking where it’s impossible to be perfect. Winning every single trade is a fantasy – it’s unrealistic. You’re going to have losing trades from time-to-time no matter how hard you work. And while that can be frustrating, it’s important to be able to put your ego aside and cut losses quickly when you’re wrong. Hoping that a stock will eventually turn around is one of the biggest mistakes new traders make.
Just like in baseball, failure is an intrinsic part of the game. The best hitters of all time only have batting averages between .300-.400, meaning they succeed 3 or 4 times out of 10 and fail the other 6 or 7 times. The critical part is leaning from those mistakes so that you can avoid them in the future. Own up to your mistakes, learn from them, and strive to become a better trader in the long-run because of it.
Penny Pro Scam Allegations – Is the Service Legitimate?
You may come across some message boards claiming that Jeff Williams uses Penny Pro as a platform for promoting stocks, but every single stock trading newsletter out there has to deal with similar criticism.
What validates Penny Pro in my eyes is the premium educational library it provides: hours upon hours of SuperNova University video lessons, webinars, and exams to enrich traders with knowledge on a wide variety of trading concepts, including: Fibonacci retracement, risk vs. reward, slow stochastic lines, candlestick patterns, moving averages, Bollinger bands, situational buys and sells, relative strength index, and more.
Yes, Jeff Williams sends out alerts to his subscribers on stocks he already has a stake in, but he’s sending those alerts based on solid technical setups. If you master the concepts covered in the lessons provided, you can certainly find these high-potential trading opportunities on your own.
Conclusion – Is Penny Pro Worth The Cost?
The small cap penny stock arena is known to be the most explosive in terms of volatility, creating tremendous opportunity in portfolio growth for those able to position themselves on the winning side of trades. For less than $2 per day, you can receive an abundance of educational content that can set you on the course to becoming profitable on Wall Street. Small portfolios can be taken to great heights with patient, disciplined, educated, and ultimately successful, penny stock traders behind them.
**2021 UPDATE** → Check Out My #1 Recommended Learning Program For Beginner and Intermediate Traders
Jeff Williams had a rough start in trading over 15 years ago, as have many others. He claims to have lost $85,000 when he first started, subscribing to free Pump and Dump services and failing to learn technical analysis. Once he devoted himself to the educational aspect, seeking knowledge as opposed to a “get-rich-quick” strategy, everything turned around for him. Don’t make the same mistakes that he once did. Devote yourself to learning and practice with a Paper Trading Account until you’re comfortable trading real money. There’s no rush. Opportunities will still be out there in the market months and even years from now.
Written by Matt Thomas
Related Pages:
- BioPharmCatalyst Review – A Database of Opportunities For Biotech Traders
- What is StocksToTrade.com? The Most Innovative Stock Trading Platform
- What is Profit.ly? Legitimate Social Platform For Traders or a Scam?
- What is Finviz Elite? Powerful Real Time Charting Software
- What is a Day Trading System? Establish Structure in Your Approach
I don’t know much about trading, but I’m reading about it. I don’t know where to start. Is this program is good for beginners? the name has “Pro” portion, so I don’t know if it still applies to my case.
It’s good that they have video lessons and a chat room, but do they offer instant feedback? do they “hold your hand” while you are trading? what happens if you messed up a trade, will they be there to save you?
Hi Mahmood. The Penny Pro program caters to beginners, providing them with quite a bit of educational resources to build a foundation in trading concepts and strategies. Video lessons/DVDs are available on a handful of topics starting with your most basic trading terms and building up to intermediate and even expert level material. In addition to that, there are daily video watch lists recorded by Jeff Williams himself, real-time trade alerts sent out via text & email, and a chat room for sharing ideas during market hours. This is a solid starting point for individuals looking to learn about the penny stock/small cap market.
Jeff Williams also offers a next-level mentorship service along with Davis Martin called Traders Council. If you’re looking for instant feedback and hand-holding, this is the place to be. Members take part in live trading sessions with Jeff and Davis every single day, which is shared via live stream. This allows members to watch the entire process of trade planning to execution from experts. This type of access is invaluable for individuals wondering what it takes to become a self-sufficient, consistently-proftable trader living within the markets every single day.
To answer your last question, it depends on exactly what you mean by mess up a trade, but you’re the one in complete control of your own portfolio. If you make some sort of mistake like enter puts instead of calls, short instead of go long, accidentally enter a position, etc., usually it’s best to just exit the trade as soon as possible since it wasn’t part of your plan. But again, you have to be 100% accountable for your own portfolio. Mistakes like this do happen sometimes, but nobody else can push the buttons or “save” you besides yourself.
I have been researching trading lately and I think it is nice to understand what goes on behind the scenes. Penny Pro sounds like an interesting program. I think that holding these stocks for only a few days is a good tip to decrease risk especially because you said that these companies aren’t typically good long-term investments.
I think that the resources you have described sound fantastic. Most people just expect you to trust them with your money but this is an actual opportunity to learn the ins and outs of trading, and apply concepts and strategies on your own. I have read that “normal” people cannot compete with experienced traders so I shouldn’t bother. Do you think that is true or can anyone learn how to trade properly?
Hi Renton – great questions. There are certainly a lot of people who think that retail traders can’t compete with large firms when it comes to trading. The argument is that large firms have more resources, capital, connections, etc. But this idea applies mainly to well-known, blue-chip stocks. Large firms don’t typically get involved with lower-priced penny stocks, so that’s where your average retail trader can potentially find an edge.
Overall, I think that anyone can learn how to trade properly, but the entire learning process is harder than most people think. Success won’t happen overnight and it’s actually more of a mental game than anything else. It helps to be great at finding solid setups, reading charts, and researching fundamentals, but none of that really matters without the proper mindset and discipline to stick to trade plans, manage risk, and refrain from acting impulsively. The psychology of trading is always the toughest aspect for people to overcome.
I have invested in tech stocks (American) before, and I still do, but I’m yet to go down the penny stocks route…so I know very little about it.
I have heard that certain people have become very wealthy during their college years, trading penny stocks on the side…I’ve also heard they can be quite dangerous and volatile.
What are your thoughts on this? Do you feel they are more dangerous then regular stocks?
Hi Chris – great question. I think penny stocks are dangerous IF people don’t understand them. While it’s true that penny stocks are oftentimes sketchy and unprofitable, they can still provide massive opportunities for gains in relatively short periods of time. We’re talking about potential swings of 50-100%+ on any given day, which is rarely, if ever, seen with your classic blue-chip stocks.
Where people make a big mistake with penny stocks is in trying to invest in them on a long-term basis, which might pan out on rare occasions, but for the most part these companies are garbage and trending downward. So it’s important for people to understand the different between short-term trading and long-term investing when it comes to penny stocks. The major opportunities for profits are typically in the short-term, and also through Shorting instead of going long.
Overall, trading penny stocks doesn’t necessarily have to be risky if approached correctly. In short timeframes and with proper risk management measures (stop losses, etc.), the risk can be controlled. All trades/investments are inherently risky, but it comes down to your understanding of them and the actions taken to manage the uncertainty.
If I were to blindly throw money at the stock market for the long-term, I would hope I choose blue-chip stocks because they’re established, steady companies. The returns wouldn’t be too exciting with my portfolio growing somewhere around 5-10% per year, but there’s stability there. With penny stocks on the other hand, things would become much more unpredictable and volatile, making a long-term approach less than ideal. So for penny stocks, the key is to capture that volatility in the short-term in the direction you want. If that can be done, there’s a lot of money to be made, but it takes an active, risk-managed approach.
Penny Pro sounds really intriguing to me and I will certainly want more information about this. Having day traded cryptocurrency in the past, and done reasonably well with profits, this is something that would probably interest me.
Is this a program that you can join anytime? how long does the training last? I wasn’t really sure what the format of training was, so if you could expand on that a little it would be great. Do they have any examples of success?
Look forward to your reply.
Hi Tim – PennyPro is a program that you can join at any time. A subscription includes access to hundreds of video lessons/DVD’s, webinars, daily watch lists, real-time trade alerts, and a live chat room for sharing ideas and getting questions answered during market hours.
Training is ongoing and members essentially get out of it what they put into it. If all they care about are the trade alerts so that they can blindly follow “hot picks”, then they probably won’t experience much success. But if they choose to commit to the educational process, learn concepts and implement them on their own, and consistently strive to cultivate the proper mindset, then there’s a good chance they’ll find long-term success in the markets. One example of success that I’ve written about here is Jeff Forehand.
Jeff Williams also offers an expert mentorship service called The Traders Council alongside his partner, Davis Martin of DailyProfitMachine. Through this service, they take teaching and mentorship to the next level with daily live trading and Q&A sessions. This means that during market hours Jeff and Davis live stream their portfolios for all to see, they’ll answer any member questions, and even provide thoughts on various tickers and charts.
This service houses some of the best traders that Jeff and Davis have personally mentored to become consistently profitable. Jeff Williams himself has already turned three small accounts (roughly $5-10K) into over $20-25K within the past year alone utilizing a strategy that only takes about an hour a day.
I have thought about getting into stocks and forex. The problem is that the risk involved is high especially when you are just beginning. I was wondering what kind of advice would you give to someone who is just beginning? And what is the average starting price for trading platforms? And which ones are the best that you have already looked into?
Hi Alex – Lots of great questions in there. I understand what you’re saying about the risk being high for beginners, but the risk is actually whatever each individual wants it to be. My best recommendation for beginners would be to focus on the educational foundation first, learn as much as you can about the markets pertaining to your chosen strategy, and don’t worry about making or losing any money immediately. Try Paper Trading for a while to develop your skills, refine your approach, and gain valuable experience. If things are going well there, then it could be time to start thinking about introducing a real money portfolio into the mix.
The biggest mistake new traders make is jumping into trading too fast without any sort of knowledge or experience. They see the markets as an opportunity to make money without doing any work. All they have to do is click a few buttons, right? But the reality is that it takes quite a bit of hard work and time to develop the proper skills and mindset to become self-sufficient and consistent. You can’t just randomly chase alerts or follow so-called “gurus” into trades. You have to develop your own approach based on your personal schedule, risk tolerance, preferences, etc. It certainly helps to have mentors who can teach you different strategies and guide you in the right direction, but in the end it’s up to the individual trader to have the knowledge and discipline required to be successful in their approach. Overall, you choose which tickers you want to trade, how much to allocate to each trade, and when to stop out or take profits. So the risk level is completely up to you.
When it comes to trading platforms prices can vary quite a bit depending on what you’re looking for. If we’re talking brokerages, there’s not necessarily any cost for opening one up, but they will require some sort of minimum deposit (usually at least $500) and charge commissions on each trade you make (roughly $5-10 for each buy or sell). I currently use ETrade as my main broker and Robinhood secondary. Robinhood doesn’t charge any commissions, but ETrade offers a real-time trading platform called ETrade Pro that’s extremely valuable for active trading. Screening/scanning platforms are important for finding great technical setups as well. For that, I like to use Finviz, which offers both free and paid versions depending on the features you’re looking for. The free version is typically just fine for scans outside of market hours. There’s also an all-in-one platform called StocksToTrade that offers paper trading, scanning, and most importantly broker integration, which allows traders to perform all of their preparation, research, and even the execution of trades all under one roof without having to jump from tab-to-tab or platform-to-platform. It’s an outstanding platform in my opinion, but it is on the expensive side. Overall, it varies from trader to trader what platforms are required and which ones are simply nice to have based on their particular strategy and preferences. It might just take some time and experience to figure that out.
Matt, I am a relatively busy person with work but am interested in the Penny Pro Service. I have dabbed in stocks and so on before but have always been interested in Penny Stocks. I see you said how fast paced it is and wonder if a person joined how fast paced is it?. Do you have to be glued to the computer all day in order to get alerts of when to buy and sell?.
Hi Kendall. The standard Penny Pro service offers quite a few educational video lessons and webinars that can all be consumed on your own time at your own pace. But the main focus when it comes to actually trading during market hours is stocks under $10. Many times, they’re even less than $5 or even $1. Opportunities can be short-lived in these kinds of low float penny stocks, so they typically make for trades that you’d probably want to be monitoring closely. They can be extremely volatile and turn out badly if positions are managed poorly. These aren’t companies that can really be “trusted” over long periods of time like some large cap stocks can, so the majority of opportunities are available in short-term day and swing trades. Deciding if it’s too fast-paced all depends on your own personal schedule, risk tolerance, and the trades you choose to take.
I’m not sure if you’ve checked it out yet, but The Traders Council is a mentorship program that helps traders succeed without necessarily being glued to their computers all day. I say this because Jeff Williams and Davis Martin both implement strategies that can be executed within just an hour or two of market exposure. For example, Jeff is known for his “small account challenges” where he starts with a $5-10K portfolio and turns it into over $15-20K in just a few months. His strategy involves scanning for setups starting at around 3pm eastern. By 4pm, he’s narrowed down his choices to the best 1 or 2 setups, enters the trade(s), and then exits near the open the following day. His first one went from just under $7K to over $25K in just a few months, his second one went from $5K to over $16K in just a few months, and now he’s on his third small account challenge. Davis focuses more on options and sends out a “SPY Trade of the Day” each morning at around 9am. Best of all, they both live stream their accounts daily for teaching purposes and real-time trading sessions.
While they do send out email/text alerts, I highly recommend not relying on those for your trading decisions (and that goes for any trading service out there, in my opinion). The real value is in learning the concepts, understanding the strategies, and being able to execute them on your own. This program was built to develop self-sufficient, disciplined, and consistently profitable traders who eventually learn how to navigate the markets completely on their own, if necessary. It certainly helps to have a community of traders around to learn from and help pinpoint opportunities (nobody can have their eyes on everything at all times), but blindly mirroring others is a big problem within the markets. Too many people try to piggyback alerts without understanding what they’re getting into and it never really seems to work out for them. The end goal of every trader should be self-sufficiency, and that’s why I like mentorship services that take education and real-time trading access to the highest and most transparent levels.
Although on the more expensive side, a service like The Traders Council is usually well worth it if utilized correctly. That being said, most people don’t just jump right into it (although some do). They’ll start with the standard Penny Pro or Daily Profit Machine service, see if they like the video lessons, watch lists, trading strategies, etc., and then eventually move on to the mentor service with real-time trading sessions and lessons if they think it can be a good fit for them. It’s a natural progression that reduces risk since you start with the more cost-friendly service first to make sure that’s the type of trading you want to be a part of and then move on to the mentor service down the road if you choose. In the end, you kind of have to decide for yourself if some of these strategies and the pace of them will work for your own specific situation, but I hope I helped shed some light on Jeff Williams’ Penny Pro and Traders Council programs. Take care!
Which is better a mutual fund or penny stocks and what do you think about bitcoins??? I keep seeing it everywhere that this is going to be the next way we pay everywhere. How do you make money with penny stocks? Is it the same as taking the change out of your change jar and investing it. Is there a minimum amount you have to have to invest?
Hi Kimberly. There’s not necessarily a “better” choice between mutual funds and penny stocks. It all depends on your individual strategies and the goals you’re trying to accomplish. There’s nothing necessarily wrong with mutual funds, but they’re more of a long-term investment vehicle. For those with limited knowledge and time, it allows them to put their money into a fund, diversify with limited costs, and have their money professionally managed. Penny stocks, on the other hand, are low-priced speculative stocks that can provide outstanding returns on a short-term basis. Most of the time, penny stocks are bad long-term investments, but for short-term day and swing trading, they can provide quite a bit of volatility both to the upside and downside. That volatility creates opportunities that momentum traders love. Overall, much larger returns are possible with penny stocks as opposed to mutual funds, assuming they’re approached correctly. They of course require more of your own research and time to monitor and execute trades on though.
As far as bitcoin goes, it’s all the rage right now along with many other cryptocurrencies (litecoin, ethereum, etc.). My take on it is that it can provide quite a bit of volatility and open up a ton of opportunities for short-term traders. Nobody really knows if bitcoin will be the future of currency or if it will fizzle out over time, and I don’t like to personally spend too much time speculating on it. I won’t guess either way, but I’ll be looking for short-term opportunities to profit when the cryptocurrency market is “hot”. Just about a week or two ago, bitcoin was up near the $20,000 mark and has since fallen down to around $13,000 – just to show you how volatile it can be. It’s up, down, and all over the place. Will it ultimately be the currency of the future? Maybe, maybe not. But one thing’s for certain. Bitcoin-related trades will present themselves both to the upside and downside for the next few months, years, and maybe more. I made a nice profit recently on the ticker DPW, which has gone from $.60 to almost $6 in a matter of a couple months (I certainly didn’t catch anywhere close to that full move), and is now trading near $3. The point is, huge 500-1000% returns are possible within relatively short periods of time. But these stocks can drop just as fast as they rise. You have to know what to look for, be in control of your trades, and be able to protect your portfolio. Speculating on the long-term adoption and efficacy of bitcoin is really just a gamble, as opposed to taking advantage of opportunities that are happening right now with proper research, trade plans, and portfolio management.
To answer your other questions regarding penny stocks, the definition tends to vary quite a bit. Some people say it’s all stocks trading under a dollar, others say under $2, and others group all stocks under $5 into the “penny stock” category. I’ve even seen people refer to stocks under $10 as penny stocks. In any case, penny stocks are simply lower-priced stocks with small market capitalization. Traders who take part in trading them do so because of the volatility and income-potential they can provide. Of course, they have their own set of challenges to overcome when trading them that can vary from your standard blue-chip stocks like Apple and Amazon, but huge returns are what these traders are after. They’re not looking for something that will move 5-10% per year. They want something with the potential to move 5-10%+ within minutes or hours. The only minimum to deal with would be your brokerage firm’s minimum deposit requirements if they have them, which tend to be around $500-1,000. But other than that, it all depends on your personal situation and what you feel comfortable with.
I have always been interested in penny stocks and this makes me even more curious. I have seen it online for years and never have been able to pull the pin. The biggest reason is because I am scared. Can you tell me how much minimum I would need to get started.
Hi Dale – great question. You can get started educating yourself in the world of penny stocks and paper trading with $0 and no risk. That’s the absolute best way to get started in my opinion. People always want to jump right into the mix, but it’s critical to build a solid foundation first. You might think you’re missing out on potential gains, but if you go in uneducated and without the proper mindset/approach, then there most likely won’t be any gains – you’ll be looking at losses.
I put together a list of Free Resources. I’d recommend joining the PennyPro free email list for the occasional watch list, video lesson, webinar invite, etc. There will be many opportunities for education there. Once you’re ready to implement a real-money portfolio, it’s completely up to you what value to start with. It’s not impossible to take a relatively small account and build it up over time. Just take Jeff Forehand’s Story for example. Davis Martin is also a large part of the community there and just recently decided to take a $1K portfolio and attempt to turn it into a $100,000 within the next year or two. Take care!
I’m completely new to the whole idea of penny stock trading, would this course be able to teach me the basics as well as earn me a bit of extra cash on the side? Also you mention that penny stocks can still be quite volatile, are they the type of thing you buy and keep as a long term investment – or is the money in quick buying and selling? Cheers, Karen
Hi Karen – great questions. PennyPro definitely covers the basics. In my opinion, this is one of the best platforms when it comes to providing video lessons (and other forms of education) for beginner to intermediate level traders. Then there’s the Penny Stock Millionaire program for individuals looking to take their skills and profits to the next level. There are a handful of expert traders involved with this program – Jeff Williams, Taylor Conway, and Davis Martin – all of which live stream their trading accounts and teach in real-time. Profits for members can range from a bit of extra cash on the side to a full-time income. Everybody will experience different results depending on personal schedule, preferences, personality, etc. There are no guarantees, but the most successful members tend to be the ones focused on education. Penny stocks aren’t typically good long-term investments, so the PennyPro community is oftentimes looking to trade them on a short-term basis (day and swing trading). Just as a side note, the Penny Stock Millionaire program pursues many more opportunities than just penny stocks – they teach about and trade ETF’s, options, and higher-priced stocks as well.
Hello Matt,
I’ve searched online in the past and mostly found people saying penny stocks are the hardest to cash in. To be honest, personally I have never tried penny stocks. Although, lost some money in forex trading so my experience is not so great with online trading.
You’ve explained very well what PennyPro offers and the fact remains the same, do no expect huge from penny stocks in most cases. As long as there is proper training available to use the system, the price is also reasonable.
Thanks for letting people know.
Hi Sarim – you make a great point. Long term, buy-and-hold investing with a focus on blue-chip, dividend-paying stocks is clearly the preferred strategy of most financial pundits that you see and hear on TV. So it’s no surprise that penny stock trading is on the receiving end of endless amounts of criticism. But the reality of the situation is that there’s a lot more profit-potential with penny stocks than possibly any other form of trading due to the volatility.
I personally think that the #1 concept individuals need to realize before getting involved with penny stocks is the difference between trading and investing. Trading is short-term. Investing is long-term. When it comes to penny stocks, investing in them is risky. Many of the tickers trade on the OTCBB market, which doesn’t have the same financial reporting requirements as exchanges like NYSE and Nasdaq. As a result, it’s hard to judge a penny stock on fundamentals (as the data simply isn’t available or accurate), and fundamental analysis is critical when it comes to long term investments. Most of these companies don’t even make money.
These negative aspects of penny stocks, however, don’t take away from the fact that they can be highly volatile and skyrocket for various reasons, such as a signed contract with a big-name company or even just plain old hype. You won’t see a blue-chip stock soar 50-100%+ on any given day (it’s nearly impossible), but these huge percentage moves happen seemingly every day within the penny stock market. But as stated above, these volatile opportunities need to be taken advantage of on a short-term basis with day or swing trading strategies. Holding onto these stocks for long periods of time is typically a bad idea as most of them eventually fail.
In the end, penny stock trading isn’t for everybody. It’s fast-paced and requires disciplined risk management. I personally don’t even trade penny stocks all that often (stocks priced under $1) and I’ve never traded a sub-penny stock (priced under $.01). I prefer the $1-10 range – those are volatile enough for me. But there are many traders within the PennyPro community taking advantage of penny stocks on a routine basis, including Jeff Williams, Taylor Conway, and These Traders Here.
I’ve always had an interest in learning about stocks and how to trade, but I am afraid of the risk. I have a friend who used to trade penny stocks and he would profit from it, but the first time he had a loss, he didn’t trade again and that was not encouraging to me. He told me that it is too risky. Is there a way to cut down on the risk?
Hi Carol – great question. Every form of trading and investing involves risk – there’s no way to avoid it completely. But the single best way to control that risk is through education. Having an understanding of what you’re getting into is critical to success. With penny stocks specifically, you have to understand that they’re not typically the most fundamentally sound companies. In other words, their financials aren’t great. But where the money can be made is in the volatility. Drastic changes in price can result from hype and news that present huge percentage moves in short periods of time that wouldn’t be possible with standard blue-chip stocks like Microsoft and Apple. This is why discipline is critical as well – having a plan before every trade you enter, sticking to stop losses, and not getting too greedy on winners. Keeping the risk/reward in your favor at all times can result in success over the long term, even with some losses along the way.
Hi Matt,
I think education would be a must especially for people new to the penny stock arena. This sounds very technical and time-consuming. I have always wanted to invest and trade but have always been worried about the risks. I have heard that penny stocks may be difficult to sell once you own them, do you think this is true?
Thank you for sharing this great information.
Hi Dana – great question. Any stock, penny stock or not, can become difficult to enter and exit if it trades on low volume. The reason you’ve heard that penny stocks can be difficult to sell is because many of them tend to have low volume, especially compared to blue-chips. That being said, there are still stocks under $5 per share trading millions of shares per day with plenty of liquidity. The key is avoiding the low-liquidity ones and finding the tickers with higher volume. When a penny stock starts to gain traction and attention, that’s a potential buying opportunity – not when interest and volume is low.
Overall, it all depends which stock you buy, when you buy it, and the volume at that particular time. Just as an example, a well-known blue-chip stock like MSFT (Microsoft) trades around 20 million shares per day – plenty of liquidity. Right now, I’m holding some shares of a low-priced stock called ROX (Castle Brands Inc.) that trades around 2 million shares per day – still plenty of volume in my opinion. Where I would start to become concerned with volume is under the 250K shares per day range. Personally, that’s the minimum I use for entering trades – and I’ve never run into an issue where the volume has completely dried up on me in a trade. Essentially, it comes down to not holding a large percentage of a stock’s average daily volume. If it only trades 10K shares a day and you decide to buy 9K shares, then you represent 90% of the stock’s volume – that’s a trade you’d probably find difficulty exiting.
Education is good but I think the hands on using think swim. Sign up for trial and trade on paper I assume you’ll receive entrance and exit signals. You need the education but if your like me you want to get your hands on the trades and follow them. If u can’t make any money after 30 days it’s probably not for u.
Really appreciate the input, Larry. The study/practice phase is critical to trading success. As you mentioned, ThinkorSwim’s paperMoney is one of the most popular paper trading platforms for beginners. There’s also Investopedia’s Stock Simulator. Both provide you with a $100,000 virtual account to test your strategies. My personal favorite paper trading platform is through StocksToTrade, although that’s a paid service (the best they offer is a $1 trial for 7 days). Beginners can even simply write their picks down on a piece of paper or in an Excel spreadsheet in order to track them, but the aforementioned platforms are much more similar to real-life trading.