There are so many new traders and investors entering the stock market today. But if you’re brand new, you might not have a lot of money to invest or don’t want to risk a whole lot while you’re learning how to trade. So this begs the question, “What are the best stocks for beginners with little money?”
Many have found opportunities in derivatives like options. However, the trading education necessary to fully comprehend how to trade options for beginners is expansive. This is where low-priced stocks come into play. How to trade penny stocks is a very popular search term recently.
It makes sense, of course, because little money can turn into quite a lot more if you know how to do it. Trading can’t be that hard, though, right? You just find a stock that’s moving, buy it, the price increases, then sell it.
While trading may be “simple,” it isn’t as easy as that statement makes it out to be. There are different strategies to use in order to make money with penny stocks. One of the most likely first steps to take as a beginner is learning. A real stock market and trading education can pay off handsomely as it can help build consistent habits, teach you how to limit losses, and give an understanding of how to stay in winning trades longer.
In this article, we’ll take a look at some of the more popular trading styles. We break them down in terms of “how to,” and then discuss some of the most active penny stocks in July. We’ll look at different catalysts and seek out any upcoming events that may take precedence in the near term. Are they the best stocks for beginners with little money? That’s something I’ll leave for you to decide.
How To Trade Penny Stocks
Knowing “how” begins with knowing “what” you’re trading. What are penny stocks? They are shares of companies that trade for less than $5. Generally speaking, they are the stocks of smaller companies that may have either fallen on hard times or are in their early stages of growth.
Homework Time
In my experience, nothing beats good, old-fashioned due diligence. When dealing with penny stocks, you can’t rely on rumors or tips from your neighbor’s dog walker. You’ve got to roll up your sleeves and get your hands dirty with facts. Understand the company’s financial health, its business model, and who’s running the show. Be on the lookout for red flags like frequent auditor changes or a lack of transparent financial data.
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Don’t Get Swept Up in the Hype Of Penny Stocks
Penny stocks often find themselves at the center of exaggerated hype and aggressive promotion. It’s easy to get sucked into “pump and dump” traps, where prices are artificially inflated by misleading promotions, only to be sold off en masse by fraudsters, causing the value to tank. My advice? Stay skeptical. If it smells fishy and looks too good to be true, it probably is.
Don’t Bet the Farm
This advice may seem clichéd, but it’s particularly apt when playing with penny stocks: Never, and I mean never, risk more than you can afford to lose. These little devils are unpredictable, and while they promise big returns, they can also deliver equally big losses. So, as much as you might be tempted to bet big, hold onto that hard-earned cash.
Have a Game Plan
The stock market can make even the calmest people a little jumpy. To keep your cool, set your buy and sell points before entering a trade. This strategy will help you steer clear of impulsive decisions and the risk of losses that often follow them. Successful traders have learned that the stock market isn’t a get-rich-quick scheme. Success in trading penny stocks doesn’t come overnight but requires time, research, and yes, a boatload of patience.
The financial market is an ever-changing beast. To stay on top of your game, you’ve got to keep learning, evolving, and staying informed. Plus, let me tell you, the more you know, the more exciting and engaging the entire process becomes.
Trading penny stocks is akin to riding a roller coaster blindfolded. It’s risky, potentially lucrative, and certainly not for everyone. But if you’re willing to invest time, do the necessary homework, and keep your risks in check, it can turn into an exciting venture.
But always remember, the stock market isn’t a casino. It’s a place where you’re investing in businesses. So even when you’re in the realm of penny stocks, aim to back businesses with solid growth potential. Who knows, today’s tiny penny stock could be tomorrow’s Tesla.
Penny Stocks To Watch
- eFFECTOR Therapeutics (NASDAQ: EFTR)
- TeraWulf Inc. (NASDAQ: WULF)
- Akebia (NASDAQ: AKBA)
eFFECTOR Therapeutics (EFTR)
Shares of eFFECTOR Therapeutics continued bouncing back on Monday, which continued the penny stock’s recent reversal after its June sell-off.
The cancer treatment company has been in the spotlight since the end of April after presenting positive data updates from Phase 2 expansion cohorts. These evaluated its zotatifin in breast cancer patients. The findings showed that 5 of 19 patients treated demonstrated a partial response when combined with fulvestrant and abemaciclib. A partial response was also observed in 1 of 3 patients treated with zotatifin combined with fulvestrant.
More funding news was announced recently, which seems to have been received relatively well by the stock market. eFFECTOR announced an $8.7 million round priced at$1.125 per share. The offering closed this round on June 8th, with proceeds intended for working capital, including funding R&D.
TeraWulf Inc. (WULF)
Thanks to heightened interest in cryptocurrency and rising Bitcoin prices, sector stocks have gotten a boost. Thanks to Terawulf’s involvement within the space, that sentiment has carried over to WULF stock. It is a Bitcoin mining facility operator leveraging low-carbon energy production platforms. It aims to capitalize on the new “green” mining opportunity created thanks to a growing interest in environmentally friendly digital mining operations.
This month the company announced its June production and operations updates. It increased its hashrate capacity by 25% month-over-month, with self-mined bitcoin coming in at 347. This was an 8% jump over May and totaled 909 BTC minged during the second quarter.
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“Despite the increase in network difficulty and decrease in transaction fees, and many of our peers facing downtime and/or curtailed operations due to geographic concentration in Texas, TeraWulf increased its monthly bitcoin production by 8% in June,” stated Kerri Langlais, Chief Strategy Officer of TeraWulf. “Last month, TeraWulf realized an average power cost of 3.5 cents per kilowatt hour and an average availability in excess of 98% across its facilities. The Company’s low energy costs and high availability despite the high summer temperatures are a testament to our team’s decades of energy infrastructure management experience.”
B Riley analysts recently upped their $2 target to $3 while also keeping a Buy rating on the penny stock. As BTC prices have acted as a boon to crypto stocks, it has also done the opposite in times of downturn. Keep this in mind if WULF stock and other Bitcoin/crypto-related penny stocks are on your watch list.
Akebia (AKBA)
Akebia Therapeutics has been a focal point for investors over the past few months, largely due to its significant jump in April and May. The company’s appeal to the FDA concerning its anemia treatment, vadadustat, has been a key driver of this interest.
Akebia engaged in discussions with the FDA about the future course of action following an interim response to its Formal Dispute Resolution Request. This was initiated in response to a Complete Response Letter received in March. The market sentiment was further buoyed by a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) in Europe regarding the drug candidate. Additionally, the company showcased posters at the National Kidney Foundation Spring Clinical Meetings held from April 11-15.
Fast forward to the end of May, and Akebia received marketing authorization for vadadustat, now branded as “Vafseo®,” from the UK Medicines and Healthcare Products Regulatory Agency. Swissmedic also approved Vafseo for symptomatic anemia, bringing the treatment’s approval to 34 countries. However, the future of the drug in the US market has come under scrutiny. The FDA rejected its formal dispute resolution but provided guidance for approval and the resubmission of a new drug application (NDA).
The company has seen a surge in analyst interest, with firms such as HC Wainwright and Piper Sandler setting price targets above current levels. HC Wainwright has set its target at $2. Meanwhile, Piper Sandler has upgraded its rating to Overweight and raised its target to $4.
