10 Pieces Of Advice Every Penny Stock Trader Should Know

Trading penny stocks is one of the riskiest investments in today’s market. The stocks are extremely cheap for a reason, and this causes the stocks them be so volatile.

With that being said, Benzinga talked with Timothy Sykes, Peter Leeds and Ross Cameron to understand the key strategies that help make them one of the top penny stock traders in the world.

1. Practice With "Monopoly Money" First: Prove that you can make money trading penny stocks through simulators before you start trading with real money. The market is always going to be here, so experts highlight how important it is to practice first instead of possibly seeing detrimental losses in your first week of trading.
2. Penny Stocks Move Very Inorganically: So, with proper research, you can invest and succeed by just trading the price action.
3. Penny Stocks Move For Stupid Reasons, But You Can Still Capitalize Off Of This: According to Sykes, he watches to see if penny stocks receive an investment from a billionaire is being featured on a major news outlet or had a recent .com website listing.
4. Experts Don’t Diversify Their Portfolio: The three experts we spoke to rarely have more than one or two penny stocks in their portfolio.
5. There Is No “Best Broker”: However, some of the brokers to check out include E-Trade, i-Trade, Lightspeed Trading and Interactive Brokers.
6. Be Creative: If you are interested in finding a penny stock you think might be a hidden gem, check out the company’s operations. Leeds, the author of “Penny Stocks For Dummies,” recommends calling investor relations or even showing up at the company’s headquarters unannounced.
7. No Penny Stock Is The Next Amazon: Remember most penny stocks are flat-out frauds.
8. Experts Might Hold The Stock For 6 Minutes Or Up To 6 Months: If you are a day trader, you may be buying and selling stocks at an average of every five or 10 minutes. But, investors who are looking for long-term plays and do not want to trade much off momentum, might hold penny stocks for as long as six months.
9. Penny Stock Trading Does Not Need To Take Up Your Whole Day: Most penny stock traders spend only one or two hours a day actually trading.
10. Stay On The Lookout For Notable Headlines: If you find new you think might is notable, research it, go to trading chat rooms, and see if the news might justify the stock moving higher in the near future.