how to buy penny stocks

You’ve decided to invest in penny stocks, but aren’t exactly sure what you need to know to maximize your gains. Well, you’ve come to the right place. Believe it or not, a majority of successful companies begin as penny stocks before they mature to become household stocks everyone wants a piece of the action from.

Unfortunately penny stocks aren’t immensely popular among certain investors and traders, but this is mostly because people don’t understand how to invest in penny stocks. If you do your homework and learn how to invest in penny stocks, you can invest in companies for pennies on the dollar and potentially realize impressive gains.

Stick To What You Know 

  • Most investors recommend focusing on penny stocks trading on the AMEX, OTC-BB, and Nasdaq versus looking to pink sheets and other indexes. 

Let People Keep Tips To Themselves 

If someone tells you about an incredible opportunity or a company you “have” to look into, double check these stocks. Do your research, become knowledgeable, and make your own decisions when investing. Don’t rely solely on someone’s opinion or penny stock tip.

Nothing In Life Is Free

There’s nothing free in life except death and taxes. If you receive a newsletter, email, or other forms of communication talking about free penny stock picks, know what you’re getting into. Many times, the people releasing this information just want you to buy shares, and they will likely dump the shares as soon as people invest.

Stories Are For Fairy Tales 

Story stocks are companies focused on a major idea or something conceptual/still in the works. If you’re trying to play it smart, don’t believe everything you read or hear about these companies. Don’t buy into the hype!

What Makes A Great Penny Stock?

Investing in penny stocks has the potential to be incredibly lucrative, but you need to know what to look for, i.e., what makes a good penny stock? 

  • Strong executive leadership with a clear focus and a background with other successful ventures 
  • Market shares are enjoying healthy growth in a nascent industry 
  • Companies invested in “big industries” have intellectual property worth investing in when pitted against major industry players 
  • Clear sense of direction in terms of marketing, getting the word out 

Practice Makes Perfect 

As the saying goes, you miss 100% of the shots you don’t take. Having said that, if you don’t practice, you’ll never get it right. Luckily, investors looking to buy penny stocks can use “paper trading” to hone their skills and strengthen their abilities in the penny stock market. What’s great about paper trading is that you’re never using real money. Once you’ve gotten comfortable and think you have a shot, then you can invest real capital in penny stocks. 

  • Use an imaginary amount of money 
  • Keep real penny stocks on your radar and “invest” in penny stocks that you would if the money were real 
  • Write down the trades you “make,” and keep track of the name of the company, the share price, and how much you spent on each trade
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