Penny stocks are shares of companies that trade at below $5. Because of their low per-share value, penny stocks are not sold on the exchanges but over the counter (OTC) and through networks and bulletin boards that stockbrokers have created.
Suppose you are considering getting into day trading penny stocks. In that case, you most likely are wondering whether it is an economic activity that can grow into a valuable business in the long term. In other words, you want to know if it can give you an income that grows over time.
Indeed it is possible to turn day trading penny stocks into a full-time job, and a lucrative one at that. Many people around the world have achieved this milestone. It is, however, essential to point out that, just like any other economic endeavor, you are not guaranteed to succeed. This is not a shortcut to making vast sums of money.
The foundation of penny stock trading success
Many factors come into play and determine whether you succeed or fail. Some of these factors are within your control while others aren’t. It is by optimizing the factors you can control that you can generate a sizable income.
At the minimum, you should know the best penny stocks to look at and trade, as well as the ones you need to avoid. Indeed, just like with the stocks at an exchange, the performance of penny stocks is not uniform, and that is because the nature of each is unique.
Also, the potential to provide trading opportunities for a specific penny stock changes day to day, week to week, and month to month.
It is essential to point out, however, that penny stocks in a class could increase in value at the same time owing to an event that affects all of them.
Identifying a possible price growth wave
For example, in late September 2020, many start-ups and small companies that have lithium battery-related innovation and production saw the value of their stocks grow.
The short boom was triggered by the announcement on September 28 that Piedmont Lithium Ltd. (NASDAQ: PLL) had signed a deal with electric car manufacturer Tesla (NASDAQ: TSLA). According to the press release, Piedmont committed to supplying Tesla with lithium for five years. Lithium is a critical compound for making batteries, which Tesla needs in the cars it manufactures.
As a result of this announcement, the prices of penny stocks of other companies dealing with car batteries and related technologies also went up. The list includes American Battery Metals Corp (OTCQB: ABML), American Lithium (OTCQB: LIACF), and Flux Power Holdings Inc. (NASDAQ: FLUX).
As a reaction to Piedmont Lithium Ltd and Tesla signing a contract, the price of American Battery Metals Corp (OTCQB: ABML) rose from a low of $0.115 to a high of $0.214. That is a near 100% increase. That means a trader who bought stocks worth $1000 managed to sell them at near $2000, making $1000 within 24 hours.
Meanwhile, the share price of Flux Power Holdings Inc. (NASDAQ: FLUX) jumped from a little over $5 to about $9. This was also close to a 100% increase.
These two examples show that anyone fast enough to link the Tesla- Piedmont to the performance of the market, they made as much as 100% profit on the 28th and 29th of September.
What else you need to build a penny stock business
In addition to having the capacity to identify events that could cause price movements, you also need to have trading skills. It is important whether you know how to read charts and set goals, for example.
It would be best if you also had a high level of discipline and in control of your emotions. It would be best if you also could create a detailed and data-informed day trading strategy.
One of the best-known success stories when it comes to penny stock trading is Timothy Sykes. He started trading in his early twenties. He has gone on to make millions of dollars using the strategies and tools he has perfected over the years.
He has also grown into a respected penny stock trading trainer. Some of his students have managed to grow a few thousands of dollars in capital into millions over the years.
Timothy Sykes has credited his technical knowledge, discipline, and controlled emotion for the success he has realized.
Aside from your own technical capacity, skill, and knowledge, you also need to overcome or at least be aware of the unethical practices of other players in the space. That includes companies that mislead their investors and third party players who buy stocks then promote them so that they can sell at a higher price.
Conclusion
Like any other form of investment, petty stock trading isn’t for everyone. However, if you are willing to put in the hours to learn the ins and outs of the trade and have a keen eye for opportunities and risks, you stand to make a lot of money from it.
