A Beginner’s Guide to Trading Penny Stocks Under $1
The stock market is a complex and ever-changing landscape. For investors looking to get in on the action, stocks trading for under $1 can present significant potential returns. But like anything else in the stock market today, there’s risk involved. Before entering this potentially lucrative arena, you must understand what you’re getting yourself into.
When choosing penny stocks to buy under $1, it’s best to look for those with solid fundamentals and good prospects for long-term growth. Companies that have seen some success in the past and are now trading at less than $1 may be prime candidates for investing. However, it’s generally few and far between that you’d see both extremely low prices and meaningful fundamentals. For that reason, many stocks under $1 are treated as shorter-term trades than longer-term investments. Though there are some exceptions.
The Benefits and Risks of Investing in Low-Cost Penny Stocks
An often overlooked factor when researching stocks below $1 is liquidity. You don’t want to invest your hard-earned money only to turn around and find out you can’t sell easily or quickly. Therefore, consider the volume of shares traded and bid/ask spreads when deciding which stocks under $1 are worth investing in.
Next, consider how much diversification your portfolio needs when investing in these low-priced stocks. Stocks trading for under $1 tend to be more volatile than higher-priced securities. Therefore, if you allocate too much money toward them, risk levels will become unmanageable if the underlying company performs poorly. Some traders will use a rule to allocate no more than 10-15% of their portfolio toward penny stocks. However, more cautious investors may opt for even lower percentages. Meanwhile, more aggressive investors may go up a bit higher depending on the specific situation.
You’ll also want to know what kind of return goals you realistically want when it comes to finding penny stocks under $1. That’s so you can measure against expectations later on down the road. This will help keep emotions about investment decisions from clouding your judgment when trying to decide whether or not now is a “good” time to buy or sell such securities.
Prices frequently fluctuate with news events related to individual companies and overall market sentiment alike. Both positive and negative news stories have been known to move these types of stocks dramatically in one way or another. So be mindful of such events may prove beneficial over time regardless of whether they confirm desired outcomes or not.
While investing in anything carries its unique set of risks – especially when considering low-priced stocks – with proper research, monitoring, and diversification strategies, anyone can gain insight into trading penny stocks under $1. Proper education and understanding the right return objectives upfront are key tools. They will allow traders to reap the rewards of successfully investing in low-cost assets over time.
Top 4 Reasons to Trading Penny Stocks Under $1
While there is a much higher risk, the reward potential can be significant. Here are just a few of the top reasons traders will opt to find penny stocks under $1 for their watch lists:
- Greater Potential for High Returns: Low-priced stocks often have more significant potential for higher returns during a shorter period of time than higher-priced stocks due to their lower cost entry point.
- Increased Volatility: Low-priced stocks can offer increased volatility and more opportunities for trading as prices can rise and fall quickly, creating opportunities for investors to generate profits if they are able to capitalize on the movements in the short term.
- More Affordable Entry Point: Stocks trading below $1 present a much more affordable entry point in comparison with traditional investments such as mutual funds and ETFs that require hefty initial investments.
- Access To Bargains: Some low-priced stocks can be great bargains as investors can get access to companies with strong fundamentals that market participants have overlooked due to their lower price points. However, a keen eye for financial detail is necessary. This year has been quite unique in terms of low-priced stocks. Many of the companies trading for pennies were valued much higher, less than a year ago. But the stock market crash 2022 has brought resulted in stronger companies experiencing weaker footing in the stock market. Should you stumble upon one that is trading for pennies and thinking it’s time to invest, make sure you consult a financial professional and do plenty of research first.
10 Top Penny Stocks Under $1 To Watch This Week
This week is a shorter week due to the holidays, but that doesn’t mean there aren’t penny stocks to watch. Considering that trading volumes may be lower, make sure you take this into account. However, based on some of the trends from last week, unusual volume and market activity may have a few of these penny stocks on watch lists at the beginning of the week. We’ll also include some recent developments that may be worth noting if these are on your list:
- Metacrine Inc. (NASDAQ: MTCR)
- Recent insider buying by one of the company’s 10% owners.
- Agrify Corp. (NASDAQ: AGFY)
- Recent insider buying by CEO and Chairman.
- Oragenics Inc. (NYSEAMERICAN: OGEN)
- Plans for 1:60 reverse stock split that will begin in January (1/23/2023).
- Seanergy Maritime Holdings (NASDAQ: SHIP)
- Recently declared a quarterly dividend of $0.04/ share for shareholders of record on December 28th.
- Express Inc. (NYSE: EXPR)
- Recently withdrew a filing for a potential stock sale.
- Pagaya Technologies Ltd. (NASDAQ: PGY)
- Unusual trading volume and recent string of 13D filings for beneficial ownership of the company.
- Vislink (NASDAQ: VISL)
- Upcoming annual meeting this week on December 27th, 2022.
- VEON Ltd (NASDAQ: VEON)
- News during the holiday break announcing the company obtained OFAC license for a Scheme Meeting.
- Gran Tierra Energy Inc. (NYSE: GTE)
- Provided info in Dec. 5 update that it would plan “to prepare an evaluation area proposal for submission to the Agencia Nacional de Hidrocarburos in Colombia prior to the end of 2022.”
- TeraWulf Inc. (NASDAQ: WULF)
- Bitcoin-related company traders have monitored as volatility in cryptocurrency prices increased over the weekend.
New To Trading Penny Stocks?
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