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Is Making Money With Penny Stocks Possible in 2021?

Investing in penny stocks in 2021? Check out these tips before making a watchlist

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How to Make a Profit Trading Penny Stocks As the Pandemic Ends

Trading penny stocks in 2021 can be a lucrative opportunity. But, the most important step to making money with penny stocks is to know what you’re doing. And no, there are no hidden secrets or tricks that the best investors know, and you don’t. Rather, it takes time and a dedication to understanding what makes the market move. 

In 2021, there are plenty of events that are impacting the trajectory of the market. And with the entire list of penny stocks, we tend to see high speculation across the board. This means that for the most part, worldwide and industry-specific events will have a decent impact on both industries and specific penny stocks.

In addition to understanding the speculative factors that make the market move, investors need to know how to trade. This can be done with a great deal of learning and education. But, with the internet at all of our fingertips, this is entirely possible. 

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Lastly, it is important to develop a trading strategy. This will go hand in hand with your portfolio goals. For example, if you’re looking to make long-term gains, certain penny stocks may be better for you. However, if short-term swing trading is your choice, others could be more suited to your portfolio.

While there is no one strategy, the commonality that all pro traders share is a method. So, find yours, and stick to it. Considering all of this, let’s take a look at how to make a profit trading penny stocks as the pandemic ends.

3 Ways to Profit With Penny Stocks As Covid Comes to Close 

  1. Reopening Penny Stocks 
  2. Long Term Positions 
  3. Meme Penny Stocks; Worth It or Not?

1. Reopening Penny Stocks 

The trend of reopening penny stocks is a phenomenon that has occurred this year and through most of 2020. If you’re unfamiliar, let’s go into greater depth. When the pandemic struck at the beginning of 2020, many penny stocks alongside the stock market dropped significantly in value in only a short period.

But, as it became the new way of life, many companies quickly began to see their share prices rise. Those benefitting the most from reopening, are aptly referred to as ‘reopening penny stocks’. While this term is quite loose, there are some ways to figure out which penny stocks belong. 

Some questions to ask include, has the company benefitted from the pandemic? Is its demand going to increase as Covid cases lessen? These are just a few ways to figure out which companies could be worth watching. Some examples of industries affected positively by the current state of Covid include biotech penny stocks, entertainment penny stocks, marijuana penny stocks, and more. And, given that we are still in the very early stages of reopening, there could be a lot of potential left to discover. 

As always, investors need to do their research to understand if a company has value moving forward or not. This includes looking at financials, balance sheets, recent announcements, and more. But, with vaccine rates hitting all-time highs, investors continue to show excitement about the coming months. 

2. Long Term Positions 

Investing in penny stocks for the long term is something that is not often discussed. Because stocks under $5 tend to be so volatile, investors usually use them as short-term financial instruments. This is referred to as swing trading. However, during the pandemic, many penny stocks have climbed out of penny stock territory, moving beyond the $5 threshold. 

And while some investors still choose to swing trade, others are looking for long-term positions. It’s worth noting that the high volatility of small-caps means that large gains and losses can be seen throughout every trading day. But, if you know how to trade penny stocks, surprises in your portfolio can be largely avoided. As long-term positions pertain to the pandemic, investors need to consider which companies may benefit in the next 3-6 months. 

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This could be biotech companies working on a Covid treatment, entertainment companies looking to reopen business, and more. But, it is extremely important to think outside of the box, considering how certain events will trigger momentum with certain companies. And while short-term positions may only need a speculative event to occur to see gains; with longer-term holds, investors need to look at the financials and fundamentals that a company offers. 

The best advice here is to find a penny stock to buy, buy it, and trust your strategy in the long term. Considering all of this, a long-term trading method with penny stocks may not be the most popular, but it can be a great way to take advantage of economic reopening. 

3. Meme Penny Stocks; Worth it or Not?

If you invest in stocks in 2021, you’ve most likely heard of meme stocks. This includes companies like AMC Entertainment Holdings Inc. (NYSE: AMC), BlackBerry Ltd, (NYSE: BB), GameStop Corp. (NYSE: GME), and more. If you’re unfamiliar, this is a phenomenon closely tied to Reddit stocks, and other trending companies. I

n the past year, investors have congregated on social media platforms to invest in companies based on emotion rather than fundamentals. This has resulted in multiple, quadruple-digit percentage gains in only a short time. It’s extremely difficult to say for certain whether meme penny stocks are worth it or not. One of the most important factors to consider here is your threshold for risk and volatility. 

Because price fluctuations are the main pull with meme stocks, they can be some of the most volatile assets out there. This is not necessarily a bad thing, however, it is best to know what you’re getting into. Second, many meme stocks can ascend in value very quickly, and then fall just as fast. This leaves many investors, especially those with FOMO, at risk of losing their investments. But, if caught at the right time, investing in meme penny stocks or any meme stocks for the matter, can be a profitable endeavor. 

Despite this phenomenon only beginning in the past year, the momentum it has picked up shows that it could be here to stay. While you may not want to invest the majority of your holdings into meme stocks, they can be an interesting addition to your portfolio. Considering this, are meme penny stocks worth it or not?

Which Penny Stocks Are You Watching This Year?

Finding the best penny stocks to buy in 2021 is all about understanding current trends in the market. By reading up on trends and staying up to date with geopolitical events, investors can work to stay ahead of the game.

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Many traders believe that being informed is one of the most beneficial things one can do for their portfolio. And because of the extraordinary year, we are having, this is more important than ever. With so many moving parts in the stock market right now, which penny stocks are you watching this year?

By J Dylan

J. Dylan is a Miami-based financial writer with years in the industry. He enjoys surfing in his free time and spending time with his dog. Josh grew up in California and has been covering different financial sectors for the past five years. His specialty is in penny stocks, tech, cannabis, and biotech.

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