3 Things to Keep In Mind If Investing in Penny Stocks in August
With August only a week or so away, there are plenty of things on penny stocks investors’ minds. And, after a week of wild trading commences, many investors are left wondering what next month will have to offer. On July 19th, much dismay was felt around the stock market as the S&P 500 dropped by over 700 points. This was a sharp response to higher case numbers as a result of the Delta variant.
And, while Covid had not had a major effect on the market over the past few months, Monday marked the day that it showed its ugly face once again. While no one can predict where the pandemic is headed now, many believe that it will still work its way into trading both penny stocks and blue chips. And for this reason, it’s one of the most important aspects to keep in mind right now. The next thing we have to consider is the effects of Reddit and Robinhood on penny stocks.
Both of these have shifted the way that stocks trade over the past year and a half, and continue to do so. As you can see, buying and selling penny stocks is all about understanding how different factors will affect the market. And with so much to consider, let’s go in-depth into a few need-to-knows for next month.
3 Things Penny Stocks Investors Should Know For Next Month
- Volatility With Penny Stocks is Here to Stay
- Keep an Eye on Current Events
- Know Your Investing Strategy
Volatility With Penny Stocks is Here to Stay
When it comes to trading penny stocks, volatility is one of the mainstays that investors have to deal with. On Friday, we saw massive price swings with certain stocks. This includes those such as Meta Materials Inc. (NASDAQ: MMAT), Medigus (NASDAQ: MDGS), GameStop Corp. (NYSE: GME). But if you have the right tools at your disposal, volatility can be put to use as an asset rather than something to incite fear.
The best way to take advantage of large price swings is to have a trading strategy. This is something that all great traders utilize and is also something unique to your investing strategy. With so much movement, it can seem like a lot to keep track of everything at once. But, with individual rules for your portfolio, trading can become automatic once you find a penny stock you’re interested in.
And, with several geopolitical events occurring at once combined with the inherently volatile nature of penny stocks, we will likely continue to see prices move up and down during next month’s trading. But, to stay ahead, investors should consider what is driving price movement and how to take advantage.
Keep an Eye on Current Events
Keeping an eye on current events is one of the best methods to making a profit with penny stocks. As mentioned earlier, volatility may be up and down, but speculation is occurring almost all of the time and is the driving force of volatility. For this reason, we can use speculative events to our advantage to try and predict price movement.
As an example, let’s say Covid cases rise as they are right now. This would drive investors to both safeguard stocks such as mining stocks, but also to reopening penny stocks. It’s important to consider the time frame that you wish to invest in as well because this can help to determine which stocks you may be interested in. So, besides Covid, we have to consider what else is going on in the market.
Right now, another factor is Reddit and the effect of social media on penny stocks. This is nothing new per se, however, it has only become a major mover and shaker in the past year or so. The effect of social media on penny stocks began with the likes of GME stock and AMC stock but quickly extended into a wide range of both blue chips and penny stocks. And in 2021, this notion does not look like it is going anywhere. So, considering all of this, understanding what is making the market move, will be a major asset to your portfolio.
Know Your Investing Strategy
This has been mentioned frequently in this article, and across other articles on the site. However, having an investing strategy remains one of the most important things you can do to align your portfolio with your investing goals.
Let’s say you’re looking for long-term growth in your account. You would likely not go for the most volatile penny stocks, but rather for those that could break out of penny stocks territory in the long term. And, this goes for the opposite as well. Without a trading strategy, investors are subject to FOMO (fear of missing out), and potential losses based off of trading on emotion.
Ask any pro trader and they’ll likely give you a quick list of the principles that they follow on a daily basis. And, what better time to make a trading strategy than with a new month ahead. So, considering this, are you a long-term or a short-term trader? What are your goals in that time frame? And, what area of the stock market is your portfolio focused on? These questions will help to align your August penny stocks watchlist with your overall likelihood of meeting your goals.
Will Penny Stocks Continue to See Gains Next Month?
The short answer to this question is that it’s anyone’s guess. While there is a lot of positivity in the stock market right now, penny stocks tend to change quickly on a daily basis. For that reason, using the above tips will help to give you the best chance at making money with penny stocks.
And while a new month may not be the cause of major gains off the bat, it is a symbolic reset that could help to put the market back on a bullish trajectory. Considering this, what do you think? Will penny stocks continue to see gains next month?