Buying Penny Stocks for Mad Money

If you’re looking at where to buy penny stocks, there are tons of brokerage houses out there that can fit the bill. I only really have experience with one, and that’s TD Ameritrade. I can honestly say that they have an excellent platform, above average execution, and excellent account management. In this modern era of online stock trading, it’s almost absurd for you to call orders in to a broker, only to have him/her charge you anywhere from $25 to $100 bucks a pop to do it. Dude (or Dudette, if you will), get you an online trading account, self-directed, learn how to read charts, and then you’ll see a whole new world of opportunity open to you.

When I recently reviewed my previous posts about penny stock trading, it hit me that I never really explained what a penny stock was…to the uninitiated, it might be a little confusing when they find out that many “penny stocks” trade for well over a penny a share. A penny stock, according to the most traditional definition, is any stock that trades for under $5.00 a share. This has been my neighborhood since I started trading roughly twelve years ago. You simply cannot beat the leverage that is available with trading penny stocks. Think about it: If you only trade the “blue chips”, which are the big name, big reputation, big money stocks like Google, IBM, Wal-Mart, etc., you’ll have an impressive portfolio by name, but no real chance of turning a decent profit without a freakin’ miracle happening.

For the guy with the small budget, there’s no way he can expect to earn a decent return on his trade with a stock like Google, which, at the time of this writing, is trading at roughly $566.00 a share. Only the “whales” of the industry (ones that can start with at least $1,000,000 or more) can have any kind of real chance at turning a profit with this kind of stock. But, with the blue chips, you normally adopt a “buy-and-hold” strategy, which is absolutely boring in my mind, and takes too long. Think about it: Wouldn’t it suck if you decided to adopt the “buy-and-hold” strategy, bought Google at $566.00 a share, and then held on for 30 years, and the stock fluctuated up & down a thousand times during that 30-year period, and then finally, after 30 years, it was worth a whopping $566.00 a share? It can–and DOES–happen. As a matter of fact, it also happens with even worse results, i.e., the stock is worth half its original entry price after 30 years. That would suck to gradually lose money like that for decades, all in the name of “dollar cost averaging”. True, you can reinvest the dividends and make some decent change off that, but that takes forever, but you could use an aggressive in-and-out penny stock trading strategy, entering & exiting the market multiple times over, can really produce exponential results…just ask Marty Schwartz. For those who may not be aware, he is one of the most successful commodity traders ever, and he utilized a trading method called “scalping”, where he would enter and exit the market several times throughout the trading day. He would pull down profits to the tune of $70,000 a day. Yup, I said DAY.

Long story short, it’s WAY easier for a penny stock trading at $0.05 a share to go up to $0.10 a share (a 100% MOVE) than for Google to go from $566.00 to $1,132.00 a share.

I’m short on time today, so I’m going to cut this post off here. Needless to say, stock prices have a lot to do with the amount of leverage you have to work with. I’ll cover more of this in future posts, where we’ll go into even more detail about the benefits of learning how to buy penny stocks.

Posted on August 4, 2014, in Penny Stock Trading, Penny Stocks, Solid Penny Stocks, Trading Penny Stocks, Trading Penny Stocks Online and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. .