New traders love to ask this question: are penny stocks worth it? I’ve been trading penny stocks for over 20 years and have made over $6 million in trading profits*…
Now I donate all my trading profits to charity, and I’ve been teaching students how to trade this niche for over a decade.
I think it’s safe to say I have a pretty good gauge as to whether penny stocks are worth it.
I’m sure you’re expecting me to say, “Of course they’re worth it! Come and join my program now and you’ll be rich!”
That’s not the case.
These days, total scammers try to sell people on the idea that anyone can be a successful trader … All lies.
The truth is, it takes an extremely dedicated student to become a successful trader. Some of my top students have watched every single video lesson — over 6,000 of them — up to three times through.
Remember, few traders make money in the stock market, but that’s because most don’t put in the work needed to find success.
So, yes, I think penny stocks are absolutely worth it — but only for the right people. If you’re dedicated to learning to be a successful trader, this article is for you. I want to talk to you about the benefits of penny stocks as well as my top two tips to find the top penny stocks.
Let’s get into it…
(*Please note: My results, along with the results of my top students, are far from typical. Individual results will vary. Most traders lose money. My top students and I have the benefit of many years of hard work and dedication. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)
Table of Contents
- 1 Are Penny Stocks Worth It in 2020/2021?
- 2 The Rewards of Penny Stocks
- 3 The Risks of Penny Stocks
- 4 How to Find Good Penny Stocks Worth the Risk
- 5 2 Tips to Trade Penny Stocks Like a Pro
- 6 Frequently Asked Questions About Penny Stocks
- 7 Conclusion — Are Penny Stocks Worth it?
Are Penny Stocks Worth It in 2020/2021?
If there’s any time to get into the penny stock market, it’s now. 2020 gave us one of the hottest markets I’ve ever seen in the past 20 years of my trading.
I’m not saying this market is the reason for their success … But a hot market can help prepared traders find and execute more plays.
There are plenty of opportunities, and it’s your job to prepare. If you’re looking to get into the penny stock market, I think this is a great time to learn.
What Are Penny Stocks?
A penny stock is any stock that trades under $5 per share. But a lot of the hottest stocks that my top students and I play are usually those that are under $1 per share.
Many uneducated traders think it’s too risky to play these cheap stocks.
The thing is, they forget that it’s just as possible to lose 10% or more on a real company as it is to lose 10% on a penny stock. The moves just happen faster in the penny stock market.
That’s also why I harp on cutting losses quickly. It’s extremely important in the penny stock market. And it’s the #1 rule I teach my students.
These stocks tend to move faster than higher-priced stocks. That’s why I love them so much.
If you study and know how to cut losses quickly, it’s possible to make 10% or more in a matter of minutes — or even seconds.
The Rewards of Penny Stocks
One of the biggest rewards of penny stocks is how fast and big they can move. It’s possible to capitalize on these moves within a matter of minutes — that’s not as realistic with higher-priced stocks.
But another huge reward is that Wall Street tends to forget about these lower-priced penny stocks. That leaves room for everyday traders like me and you, who aren’t trading with billions of dollars, to succeed in this market.
The Risks of Penny Stocks
Too many newbie traders don’t cut their losses quickly.
Since penny stocks move so fast, you need to be able to get out of trades in a matter of seconds if you’re wrong, or else it could snowball on you.
It’s also easy to get scammed by fake gurus…
Trading penny stocks without education is nearly impossible. I had to learn how to trade penny stocks all on my own, which led to me making every mistake in the book.
That’s why I’ve focused so heavily on teaching in the past few years — because I want traders to know what they need to do in order to find success in this game.
Why Are Penny Stocks Considered Dangerous?
Penny stocks are considered dangerous because not enough people know how to properly trade them.
To be fair, not enough people know how to trade higher-priced stocks either, but those stocks usually move slower. Essentially, it’s easier to lose money faster in the penny stock market.
A trading education is a must these days. You have to be aware of all the scams and sketchiness inherent in penny stocks. That’s how you learn to take advantage of this niche and stay safer. For those who don’t know how to see the manipulation in the market…
It’s generally a lot harder to find success. Ready to learn? Start with my free penny stock guide here.
How to Find Good Penny Stocks Worth the Risk
At the end of the day, if you don’t find the hottest penny stocks to play, it’s hard to make it as a trader. You need to find stocks with enough volume and volatility to make it worth it.
If no one else is trading the stock besides you, you’ll be subject to massive movements out of nowhere — usually not in your favor.
I’ve been there. Once I lost over $500K years ago by getting into a stock that I literally couldn’t get out of because there wasn’t enough volume. You can read all about that in my no-cost book, “American Hedge Fund.”
To find the right penny stocks worth the risk, you need to have a good scanner. A scanner is a program that finds penny stocks based on a certain set of criteria. Let’s talk a little more about that…
Use Scanners to Find Hot Penny Stocks
One of the best scanners to use for finding awesome penny stock trades is StocksToTrade. I use it every day and I recommend it to every trader.
StocksToTrade makes it easy to build a watchlist based on scanners that search for the top percent gainers of the day. You can filter out those stocks that don’t have a lot of volume to find the stocks that deserve your attention.
But what’s so great about StocksToTrade is that it’s more than just a stock scanner…
It has charting, indicators, and you can link to your broker to trade right from the platform. One of my all-time favorite features, though, is the Breaking News Chat add-on feature.
StocksToTrade has a dedicated team that searches for the biggest news pieces on hot stocks as they come out and alerts them to members of the Breaking News Chat.
This is HUGE in a hot market because many penny stock companies release news that might influence a trade. These days, almost 50% of my trades come from the Breaking News Chat feature alone.*
(Full disclosure: I helped develop StocksToTrade and I’m a major investor. That said, it’s my dream stock-scanning tool. It’s designed to help save time in finding the best stocks that fit my patterns and strategy.)
2 Tips to Trade Penny Stocks Like a Pro
While the pros don’t all trade the same exact stocks every day, they generally follow a similar process.
Well, my top students and I do, anyway.
So I want to give you some of the most important tips to trade the hottest penny stocks like a pro. These are the same exact tips I preach to all of my Trading Challenge students. Get ready for some key insight…
Cut Losses Quickly
You already heard me say it earlier, but I’m saying it again — this is the most important trading rule ever.
Remember, the reason so many people consider penny stocks dangerous is because of how fast they move. All it takes is one move in the wrong direction and you could be down 10% or more.
It’s not worth the headache. If a trade isn’t doing exactly what I want it to, I get out right away.
Nearly everyone takes a bigger loss than they mean to or expect.
But if my rules and lessons can help save you money by cutting losses quickly — it’s all worth it to me.
Learn From the Past
History almost always repeats itself — this is something I teach in almost all of my DVDs.
Too often, I see newbie traders wanting to invest in these scammy penny stocks because they believe the fluff press releases the companies put out.
A lot of penny stock companies engage in what’s called toxic financing to make money. Essentially, they raise money at the expense of the shareholders.
Learning to spot these scams is crucial. It will help you know when to get out — or at least make an educated guess.
Remember, you’re not always going to know how to find the exact top or bottom, but by using basic support and resistance, it’ll get a little bit easier.
Support and resistance are something you’ll find by learning from the past, too. And the more research you can do to know where to enter and exit a trade, the easier it becomes to cut quickly if you know you’re wrong. It’s why you make a plan for every trade and learn from the past!
List of Penny Stocks Worth Watching
I never invest long term in any penny stock … But I always like to have a watchlist ready for when penny stocks might run. So remember, just because I say these are good penny stocks to watch does not mean you should start trading them now.
Always make sure to take trades based on your own research and ideas. That said, here are two penny stocks from 2020 you should take the time to study and learn from…
Genius Brands International Inc. (NASDAQ: GNUS)
GNUS was one of the hottest stocks in 2020. In fact, it basically kicked off the type of momentum in the penny stock market that ended up lasting another month where it wasn’t unusual to see multiple 100%+ runners in a single day.
Take a look at this chart:
Only a few months ago, this stock was trading under $1 per share … it ended up hitting a high of almost $12 per share.
Luckily, that’s exactly what I teach my students how to avoid — it’s not worth getting caught up in all the hype. Learn to trade it instead.
This is another reminder that history repeats. That doesn’t mean it’s going back to $12 per share, but it could have another run if promoters can successfully pump it. There’s been interest in this stock in the past, and it could grab more interest in the future if it runs again.
But I wouldn’t invest in stocks like this and that’s not what I teach. I want to capture the meat of the move and be done. Singles add up!
iBio Inc. (NYSE: IBIO)
IBIO was another hot stock of this year, but it ran a little more recently than GNUS.
After trading at under 50 cents per share back at the beginning of the year, IBIO continued to climb. Eventually, it went full supernova to almost $8 per share. Here’s the chart:
While this was likely another pump, it’s still holding pretty well above lows. These are great charts for a potential short squeeze for any early short who may have been caught before the supernova.
Again, don’t get in early on these, but keep IBIO on a watchlist for another potential move to the upside.
Frequently Asked Questions About Penny Stocks
Can Penny Stocks Make You Rich?
Yes, but remember, you gotta work hard for it and commit to the process. Your journey starts with the right education — just ask my six millionaire students.* Using the two top tips to trade like a pro I mentioned earlier, you’ll give yourself a solid start.
Is it Hard to Sell Penny Stocks?
It can be. Remember, I lost $500K in one trade because there wasn’t enough volume. Learn from my mistake and never believe in these sketchy companies. You need discipline, rules, a process, and a strategy. Never buy the hype and hold and hope in this niche.
What’s the Most Successful Penny Stock Ever?
Microsoft Corporation (NASDAQ: MSFT) is one contender since it used to be a penny stock way back in the day. I never recommend investing in penny stocks hoping they’ll make insane moves. Instead, I ride the momentum of the crazy intraday moves they can make. And now I also teach my students the patterns and rules I’ve used to trade them for over 20 years.
What Percentage of Penny Stocks Succeed?
Long term, almost none. For every one penny stock that becomes a successful large-cap company, MANY penny stocks fail. To me, it’s smarter to invest in your education and learn how to think for yourself so you can be prepared for penny stock trading in any market.
How to Find the Best Penny Stocks to Trade
I use the same stock scanner every day — StocksToTrade. It’s how I find the hottest news and big percent gainers. I helped design this platform so it’s designed for the sketchy penny stocks I LOVE to trade.
Conclusion — Are Penny Stocks Worth it?
Hopefully, after reading this, you can determine if penny stocks are worth it for you.
Penny stocks have amazing potential for those who invest in the right education and learn to trade them with rules, discipline, and a process.
But for those who aren’t dedicated to learning … It’s nearly impossible. In fact, it usually turns into more of a gamble than anything else.
My top students and I didn’t become successful by gambling on penny stocks. We did it through hard work and determination. We studied our butts off month after month and year after year until it all came together.
Some of my students watched every single video lesson of mine three times over to make sure they understood it all.
That’s dedication, and it’s the kind of commitment it takes to find consistency in the penny stock market. Even then, there’s no guarantee that you’ll make it in this niche. Like I often say, focus on building your knowledge account before you even think about your money account.
Ready to jump in? Apply to be one of my Trading Challenge students.
But don’t waste your time if you’re not dedicated. I don’t have time for students who only want hot picks and alerts. The Challenge is for students who are ready to learn and find their own strategy in the penny stock market.
What do you think? Are penny stocks worth it? Let me know in the comments below!