What Investors Need to Know About Trading Penny Stocks in November
2021 has been a banner year for volatility with both penny stocks and blue chips. And as a result, many people have made money with penny stocks, and some have done the opposite.
While we are in a challenging investing environment right now, there are still plenty of ways to profit off of penny stocks. But to do so takes both a thorough understanding of your investing strategy and what the market is doing. In November 2021, there are three aspects that investors should consider when it comes to buying and selling penny stocks.
How to Make Money With Penny Stocks in November
The first is to understand what is affecting the market. This is as simple as reading the news and considering how certain events may impact certain stocks. With this, we have to look at both industry-specific and company-specific events. For example, while the energy shortage may cause a rise in value for energy penny stocks, one company releasing its financial results likely will not have a major effect on the industry.
The next thing to consider is the difference between long and short-term trading. While this may be easy, too many investors forget this, and decide to hold until a price goes up. But, with a mixture of fundamental analysis and speculative insights, deducing whether to hold or swing trade a penny stock can be much easier.
Lastly, investors should understand how to trade penny stocks from a more broad standpoint. While we won’t discuss every way to trade penny stocks, there are a few pieces of insight that traders must know right now. With all of this in mind, let’s go over three things that all investors need to know about trading penny stocks in November 2021.
3 Things to Know About Investing in Penny Stocks Next Month
- What’s Affecting Penny Stocks in November
- Short and Long Term Trading
- How to Trade Penny Stocks Right Now
What’s Affecting Penny Stocks in November
As we enter a new month, there are several trends that are impacting the stock market right now. The first and most pressing is the meme stock revolution. While this began back in January with GameStop Corp. (NYSE:GME), it has since evolved into any stock that is trending heavily across social media. This includes more recently, names like Progenity Inc. (NASDAQ: PROG) and Digital World Acquisition Corp. (NASDAQ: DWAC).
Usually, these stocks are also ‘short squeeze’ candidates, which means that they have very large short floats. While it is difficult to predict which stocks will become the next meme stocks, there are some ways to attempt to do so. The first is to scour social media to see which penny stocks are being discussed. This can be a tedious process and can lead to stocks that may on pan out in the long term.
Another factor to use is a stocks volume. While this is a metric that is only valuable during and after a breakout, it is the go-to indicator for how trending a stock is. if you’re unfamiliar, volume is the number of shares being traded on a given day. While volume can indicate millions of buys, it can also indicate when selling is extremely high. For this reason, it’s important to fully understand what volume means and how it’s affecting a specific stock.
The next factor is, of course, the pandemic. While this is less of an issue now that case numbers are declining, Covid has birthed several subsequent factors that are impacting penny stocks. This includes a major energy supply shortage which has led to a spike in oil and gas prices. In addition, it has also led to major inflation around the world. Taking all of this into consideration, we can use these tractors to our advantage.
Short and Long Term Trading
While the difference between trading penny stocks in the short and long term may seem obvious, it can be slightly difficult depending on your strategy and the specific stock. For example, if a stock has potential with a new product or government approval, it could take months before prices meet your goal.
This means that investors may want to hold the stock for the long term. However, if there is a speculative event occurring, or a meme stock that is pushing up, short-term trading may be a better option. Besides this, we also have to account for our own unique trading strategies.
Because buying and selling penny stocks is such an individual practice, investors should have a thorough understanding of their own trading style. If you’re a more conservative investor, there are low-volatility penny stocks that may fit your trading goals better. However, if you are more risk inclined, there are plenty of options as well. But, knowing which type of trader you are will help to secure profits in the time frame you’re looking at.
How to Trade Penny Stocks Right Now
Besides having an understanding of what type of trader you are, there are a few keys to buying and selling penny stocks in 2021. The best piece of advice is to do all the research you can. This means looking at company balance sheets, speculative events, and any upcoming press releases that could affect prices.
Because penny stocks are so speculative, any and every event will likely affect the company’s intraday performance. And in 2021, the influx of retail traders and the effects of Reddit and Twitter, are felt every day. This means that we can see a stock fly up or down in a matter of minutes or hours.
Although some traders don’t like to use fundamentals to trade, it is a great idea to have a thorough understanding of the company’s underlying business model. Is it profitable? Is it bringing in revenue? Does it have a lot of debt on its books? These are all valuable questions that traders should ask before investing. So, while trading penny stocks right now may not be for the faint of heart, it can be profitable if you take all the proper steps beforehand.
Are Penny Stocks Worth It in November 2021?
The short answer to this question is that it is entirely up to you and your trading strategy. While buying and selling penny stocks may be worth it for some, for others, it is too risky.
But, knowing exactly what the company does, and what it could do in the future will help you to steer closer to profits and away from losses. Considering all of this, do you think that penny stocks are worth it in 2021?