Which way? Penny Stocks education

themickey

themickey

Introduction:

This thread will be about penny stocks trading methods which will hopefully contain a lot of information but it will take some time to lay out over a number of posts, also I’m going to take my time as I have other things to do. But I’ll start here as it's a good a time as anytime.

Please refrain from posting unless you have something worthily constructive to say.

Please don’t post about individual penny stocks by name, if you wish to show a chart example then use % (percentage) scale and do not identify the stock name. I do not wish to promote by name, stock codes, penny stocks in this thread.

I’ve been trading pennies for some years and like all things trading there is an art to it.

But what really got me going was an algo I accidentally created a few years back when experimenting which drew me in. Initially I lost a lot of money but with experience have turned that around.

Penny stocks imo is a very dangerous to your wealth field unless you know what you are doing.
Drawdowns can be huge and prolonged, this is due to their highly speculative nature and the fact most pennies are under capitalized.

What I like about pennies is the fact there is huge upside potential if you get it right.
Therein lies the secret “if you get it right”!

I will show in detail how to throw the odds into your favor.

This will be a very rare thread (from me) where I spill the beans on trading.

Some fields to be covered;

Definition of penny stocks

Pump and Dump methods

Methods of trading
 
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This thread will only suit those interested in stock trading.
I’m going to lay down a foundation before I touch on the subject of trading.

These are opinions only and do not constitute trading advice.

Firstly I’m Australian and trade on ASX, the market structure is different to USA.
The way I describe things is from an ASX perspective, however there are principles which you can use on any exchange.

Penny stocks are mostly highly speculative in nature and have zero earnings.
They survive on the exchanges primarily from capital raisings which initially was from an IPO (Initial public offering) then subsequently further capital raisings when they run out of money and where they go begging again off shareholders and others.

The only reason I see for trading pennies is because you are getting in on the ground floor.
If you hit the right stock, upside is infinity, downside is 100% of your investment.

Once upon a time FMG was a penny stock, this is what it looks like now.
For some years it traded less than 1c beginning in year 2000.
In the Q1 of 2005 it was trading at a high of 55c.
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This is chart in percentage, 101,519% increase to now.
 
Now the following I borrowed from Wikipedia for their description, I did this because I wished to throw the USA slant on the definition.


Penny stocks are common shares of small public companies that trade for less than one dollar per share.

The SEC uses the term "Penny stock" to refer to a security, a financial instrument which represents a given financial value, issued by small public companies that trade at less than $5 per share. Penny stocks are priced over-the-counter, rather than on the trading floor.

Penny stocks can include the securities of certain private companies with no active trading market.

When considering penny stocks, investors and experts in the field recognize the low market price of shares and its correlation to low market capitalization. Market capitalization or "market cap" is the total dollar market value of all of a company’s outstanding securities.

Since penny stocks are inexpensive, investors often buy large quantities of shares without spending much money. This tendency makes the penny stock market volatile.

Typically, the higher the volatility, the greater the risk in investing in said securities. Conversely, the lower the volatility, the "safer" the investment is. Volatility can be also understood as the frequency of large changes in the value of a given security in either direction. This is directly correlated to the price action of a security which, when talking about penny stocks, can change more rapidly than that of a large-cap stock.

The volatile nature of penny stocks also leaves these companies open to potential manipulation by stock promoters and pump and dump schemes. Oftentimes, investors are led to believe that the ability to purchase large quantities of shares at low prices will result in greater returns, which makes them more susceptible.

Prosecutors and the Federal Bureau of Investigation say that fraud is widespread in the penny stock market.

The penny stock market has little liquidity, so holders of shares in penny stock companies often find it difficult to cash out of positions.
 
themickey said:
Amazon by rights was a penny stock to begin with, currently up 204,400% over 25 years.
More...
Seriously Mic? Amazon was never a penny stock. IPO price was 18. It split 3 times before 2000 then ran up to 90 bucks before the tech wreck when it plummeted to just under 6. Since then it hasn't split. Just under 6 dollars is as cheap as you could have ever bought it.
 
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