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Penny Stock Basics

Making Money With Penny Stocks: Is It Really Possible?

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Written by Timothy Sykes
Updated 3/5/2021 19 min read

You might’ve heard that most traders lose … so how can anyone be making money with penny stocks? 

I can tell you it’s not easy. But I believe anyone can do it with the right mindset, dedication, discipline, and the right teacher.

I teach my students how to do it in my Trading Challenge. We stick to simple patterns and my trading rules.

In this post, I’ll share how my students and I are making money with penny stocks and give you some strategies to improve your chances of success* … Let’s go!

(*Please note: My results, as well as those of my students, are far from typical. Individual results will vary. Most traders lose money. I have the benefit of years of hard work, dedication, and experience. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)

What Are Penny Stocks?

I love penny stocks and I’m not afraid to say it! This niche has given me a wonderful life and one that some people only dream of. I’m not chained to a desk working a 9-to-5

I get to work from virtually anywhere with only a laptop, solid Wi-Fi, brokers, and a trading platform. 

Making money with penny stocks has given me the freedom to travel the world, meet amazing people, and the ability to help make the world a better place through charity.

And it’s all because I found this little niche called penny stocks. (For the full story of how I got started in penny stocks, get my no-cost book, “An American Hedge Fund”.)

Penny stocks are basically cheap stocks of small developmental companies. They trade for under $5 a share. They can trade on the major exchanges or the OTC Markets.

It’s a niche the average trader or investor doesn’t always understand. But I think it offers the best opportunities for new traders to learn the game and grow a small account.

Now, let’s get into…

Making Money With Penny Stocks: Is It Possible?

Making money trading penny stocks is definitely possible. But it’s not for everyone … It takes a ton of hard work and dedication. If it was easy, everyone would do it.

Only a few people have the kind of dedication to start making money with penny stocks.

My students and I do it by sticking to the rules and staying disciplined. We don’t focus on the money. I know that sounds counterintuitive. But a lot of things about trading are.

You need to focus on the process and your trading plan first.

Thinking about money brings up too many emotions. That can impact your decision making and lead to trading mistakes. You can’t be emotional in trades.  

Trading is hard. That’s why I only have a few millionaire students and several six-figure students.* But I want more! I’m always looking for dedicated students for my Trading Challenge. Apply today if you’ve got what it takes.

How Do People Make Money Trading Penny Stocks?

making money with penny stocks how do people makemoney trading
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My students and I trade junk companies. But we don’t care about the products or services. We care about chart patterns, news, hype, and volume.

Penny stock promoters pump up penny stocks with news, press releases, and emails to unsuspecting, uneducated ‘investors.’

Then the promoters and insiders dump their shares at a much lower price. And the uneducated investors get screwed and end up holding the bag.

Once you’re educated and recognize the patterns, you won’t fall victim to these scams. My students and I are making money with penny stocks by trading these predictable patterns.

You can take advantage of the upside momentum. Or you can short it when it starts to dump … and most do eventually. Or you can trade both directions like my student Tim Grittani did when he made $200,000 in one day.*

But always be careful with shorting. These stocks can go higher than you think. Be patient and wait for the trade to come to you.

Advantages of Trading Penny Stocks

There can be so many advantages to trading penny stocks. The first is their low price. It gives new traders a chance to get into the market with a small account. You can start with a few thousand dollars and potentially grow your account with small gains over time.

Another advantage of penny stocks is the lack of competition. There are no professionals, hedge funds, or algorithms trading penny stocks. You’re competing against the penny stock ‘investors’ who believe in the company and are buying and holding.

That’s why the patterns are repeatable, And that’s another advantage…

The patterns repeat, making it easier to learn and trade the patterns. If you’re prepared and study the past, you can learn to recognize and take advantage of the momentum as others buy into a company’s lies.

But in trading, there’s no such thing as a guaranteed win.

Risks of Trading Penny Stocks

Every kind of trading or investing is risky. And penny stocks are no different.

The major risk of trading penny stocks is losing money. If you’re trading and haven’t studied and prepared, you’re taking on extra risk. Never risk money you can’t afford to lose.

Penny stocks are especially risky because they’re shady companies. A stock can be halted if the U.S. Securities and Exchange Commission (SEC) suspects stock promotion or false news that’s misleading investors.

Stocks can be halted for weeks or months while there’s an investigation. And when they re-open it’s usually at a much lower price.

Penny stocks are also extremely volatile. They can have huge price swings up and down. A stock could spike straight up but suddenly reverse and head down. So be ready to get out quickly.

If you need help surviving this market volatility, get my “Volatility Survival Guide.” It’s a resource to help you navigate this crazy market, available to you free of charge.

How to Find the Best Penny Stocks

I have no secret tip for how to find the best penny stocks for day trading. I tell students and non-students everyday … watch the biggest percent gainers.

When I build a watchlist, I always start with big percent gainers.  

Next, I check for a catalyst and I look at each chart for patterns.

If a stock’s a former runner, even better. They have the potential to run again with the right catalyst and volume.

You also need the best tools to find the best penny stocks and I have one that’s a game-changer … More on that it later…

Reading Stock Chart Patterns

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Reading stock chart patterns and technical analysis skills are a must for day trading penny stocks.

With so many fancy indicators and moving averages, it can be hard to know which to use or how to use them.

For me, simple trading patterns work the best. I use support and resistance and candlestick charts. Other traders like to have all kinds of indicators and marks on their charts. For me, it creates too much noise.

3 Strategies to Increase Your Chances of Making Money With Penny Stocks

making money with penny stocks increase your chances of making money
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Let’s look at some simple strategies to trade penny stocks…

Buy Breakouts

As a new trader, you need a few simple stock patterns to trade. All my top students started trading only one or two patterns.

Breakouts are the simplest pattern to recognize and trade. That’s when a stock breaks above a previous resistance point. This can be a high from a few days, weeks, or months prior. Or a stock could be making new yearly or all-time highs.

Breakouts are usually the beginning of an upward trend that can last a few days or longer.

Check out this post for how to identify and trade breakouts.

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OTC First Green Day

OTC stocks are my favorite kind of stocks to trade. They have cleaner, more predictable chart patterns. Stocks listed on the major exchanges tend to have more choppy price movement.

An OTC first green day happens when a beaten-down stock has a catalyst that brings in volume. It creates a big green candle on the daily chart. If a first green day stock can close near its highs for the day, there’s a chance it could gap up the next day.

Check out this video for more on how to trade a first green day OTC…

Use the Right Tools

Before you go into the market battlefield, arm yourself with the best tools and weapons.

I think the best tool to find and trade penny stocks hands down is StocksToTrade. Full disclosure: I helped develop StocksToTrade and I’m a major investor.

But you can’t beat it. It’s specifically designed for penny stocks, by traders for traders.

This platform has it all in one place — a stock screener, built-in watchlists, and customizable charts. It also has Oracle, the AI technology that can help you trade ideas. And with broker integration, you can do everything in one place.

But its best feature is the new Breaking News Chat. It’s created countless trading opportunities for me this year (I’ll share an example soon). It’s a game-changer in notifying you as soon as penny stock news comes out.

Check out this video to see the benefits…

In prepping for market battle, you also need a teacher. It’s tough to go it alone. A mentor can help speed up your learning curve.

In my 20+ years in the market, I’ve learned a lot. You can save yourself a lot of frustration by learning from my mistakes.

But you’ll still gotta put in the work. It’s not easy, but my students and I are proof that making money with penny stocks is possible.*

All my millionaire students have come from my Trading Challenge.* That’s not a coincidence. Challenge students get access to all my resources like video lessons, webinars, my DVDs, and my chat room.

Apply only if you’re ready to work your butt off. I don’t accept just anyone. I don’t have time to waste on people who don’t take their education seriously.

Top 5 Penny Stocks to Watch in 2020

Here I’ll share some recent OTC runners that I personally traded to show you that making money with penny stocks is possible.*

Want to know which stocks I’m watching every week? Sign up for my no-cost weekly stock watchlist. I won’t trade every stock, but I watch them for potential patterns.

Alaric Corporation (OTCPK: HALB)

Alaric Corporation is a venture capitalist firm. On October 13, it announced that Arizona State University discovered a COVID-19 antibody, using the corporation’s intellectually owned property.

The stock jumped 600% in one day after the news. News releases tied to the coronavirus have been the single biggest catalyst for stocks in 2020.

I traded this stock a few times during its run. But my best trade was an overnight hold on October 13. I sold into the gap up the next morning for a profit of $3,468.*

Check out the chart…

making money with penny stocks halb
HALB chart: 2-day, 1-minute candle — courtesy of StocksToTrade.com

Inspyr Therapeutics, Inc. (OTCPK: NSPX)

Inspyr Therapeutics, Inc. (OTCPK: NSPX) is a biotech focused on therapeutic treatments for diseases. On October 13, it released news that it acquired technology for precision treatment of cancer. Preclinical data showed delayed tumor growth.

I dip-bought the stock when it came down a bit off its highs and sold into the bounce for a profit of $2,960.*

making money with penny stocks nspx
NSPX chart: 1-day, 1-minute candle — courtesy of StocksToTrade.com

Luckin Coffee Inc. (OTCPK: LKNCY)

Luckin Coffee Inc. is based out of China and sells coffee, beverages, and light meals. Like Starbucks in the U.S. It’s a former runner and could offer more opportunities in the future.

On October 8, it had a perfect morning panic dip buy opportunity and I made $2,550 on the trade.*

making money with penny stocks lkncy
LKNCY chart: 6-month, daily candle — courtesy of StocksToTrade.com

DSG Global Inc. (OTCQB: DSGT)

I traded this stock about half a dozen times. But my best trades were on October 9 when the stock had a first green day OTC breakout. At first, it was a little weak. But I took another trade later in the day after it broke out.

I made three separate trades that day. One for a profit of $525,* the second for a profit of $1,568,* and the third for a profit of $945.*

making money with penny stocks dsgt
DSGT chart: 1-day, 1-minute candle — courtesy of StocksToTrade.com

Blonder Tongue Laboratories, Inc. (AMEX: BDR)

October 13, I was alerted to this trade thanks to the StocksToTrade Breaking News Chat. The company had patent news for its networking modules for display systems. I caught a nice little spike in the stock from the news and made $1,260*.

making money with penny stocks bdr
BDR chart: 1-day, 1-minute candle — courtesy of StocksToTrade.com

Frequently Asked Questions About Making Money With Penny Stocks

Is Day Trading Penny Stocks Profitable?

Yes, day trading penny stocks can be profitable. But all trading is inherently risky. Do your due diligence first. My students and I are examples of profitable penny stock traders. You won’t be right 100% of the time. Losses are part of the job. Manage your risk and always cut losses quickly.

How Much Money Can You Make Trading Penny Stocks?

How much you make trading penny stocks depends on you, your strategy, your risk tolerance, and what size positions you take. Trading isn’t like a job with a salary. What you make month to month can vary. So until you find consistency, trade small and safe.

What Are the Most Successful Penny Stocks in History

Some of the major companies you know today started out in penny stock territory. In 1997, Amazon.com Inc. (NASDAQ: AMZN) had its IPO at less than $2 per share. In the early 2000s, Apple Inc. (NASDAQ: AAPL) traded for under $1 per share. But these penny stock success stories are rare.

Conclusion: Are Penny Stocks Profitable?

Making money with penny stocks is possible. But remember, most traders lose. So why do some make millions and others lose their life savings?

There are a lot of variables in trading. It’s not an exact science. The stock market is like a moving target … Just when you think you have it figured out, it can change and humble you fast.

You must always be prepared. That means you have to study the past. You have to study chart patterns, and why stocks move. Learn how to recognize an opportunity and when you should cut your losses.

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I help my students prepare for the battlefield of trading. I give them the tools and weapons to do battle against the competition, promoters, and pumpers.

You don’t have to struggle and make every mistake in the book to learn how to trade … Apply for my Trading Challenge and learn from my mistakes. That’s the benefit of having a mentor and teacher.

Do you think making money with penny stocks is possible? Let me know in the comments … I love to hear from you!

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”