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How to Make Money off of Penny Stocks

Updated on October 9, 2010

Penny stocks usually attract day traders. Day trading is hectic and a lot of work at times, but the potential of making money can be enormous. A lot of stock traders with look down on day traders and that's usually the rich guys who are investing in roth IRA's and long term investments in the DOW 30. More than likely, you are reading this because you don't have a million dollars to invest. If so , this is your best option. There have been many success stories of people investing $100 and turning it into $1,000 in a months time. While this is hard to do, it is still very possible. You don't have to be Warren Buffett to make money. You just have to work hard at it and keep all 3 eyes open. That's right, if you think you have both your eyes on it take another look and make sure.

How to make money with Penny Stocks Tip #1

Penny Stock Newsletters

The 1rst thing everyone needs to know before investing in penny stocks is that you can lose money as quickly as you make it. The reason penny stocks are penny stocks is because the companies that own them are either just starting out or they don't have a business plan interesting enough to convince banker's to take a risk and invest in them. So before buying you should do extensive research into which stock companies have a steady increase rate. You don't want to invest $10,000 into a company that fluctuates 50% one day then back down 60% the next. The best way to do this is to get out there, search google and yahoo and sign up for newsletters of insider reviews. There are literally thousands of sites offering newsletters, however, not all of them are offering them to help you out. Some could be inside traders, looking to dump potential falling stocks off on you. The way to avoid this is to sign up for the newsletter, find a virtual stock trading website like or and add the stocks in the newsletter to your watchlist or you can manually just watch the stocks yourself. Either way, waiting about 2 or 3 weeks at least is best to see if the newsletter is beneficial.

How to make money with Penny Stocks Tip #2

Stop Losses

The 2nd thing you need to know about penny stocks is stop limits. As stated earlier penny stocks can fall as quickly as they gain. There are several penny stocks out there that gain 20% 30% even as high as 200%. There are also even more that lose those percentages. This is why you need to learn about stop limits. You can have stops put on either end of the stock you are investing in. If a stock is rising, let's say it starts out at .03 cents and gains up to .06 cents, then put your stop at .06 cents. You have already made a 100% gain. Even though the stock may continue to rise, more often that not it will fall back down. This way you have made an excellent profit on your investment and can move on to the next insider tip you have. Stops can also be put on the downward end. If you have a stock that is losing you can make sure you sell out at a certain point so you minimize your losses. This is a must for any stock. Penny stocks definitely take more work than the DOW 30. You have to keep an eye on them at all times.

How to make money with Penny Stocks Tip #3

Stock Brokers

The 3rd thing to know before investing is the right Broker. Once again you are going to need to go to Google or Yahoo and do some researching. Brokers on these websites make a commission off of your stock gains, so that is one thing you will need to discuss with them. With the availabilty of the stock market on the web these days, stock trading companies have been forced to compete with each other. Many sites offer trades for less than $10. The most trusted sites are ($7 per trade), ($4 per trade) and ($4.50 per trade). Zecco also has a no minimum investment. These are usually the best sites to find a broker on as they are all worldwide sites and well established.

How to make money with Penny Stocks Tip #4

Stock Investor Guides

The 4th thing you absolutely need to know is most penny stock investors, unfortunately, lose money. For this reason you may want to put a little money into a stock investor guide. There are several out there. Most come in pdf or eBook format. Some may cost a litte more than others, but some you can get for $10. It may be the best $10 you ever invest. I have listed some good books to check out if you are going to take that route.

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