When most people think about trading stocks, they imagine million-dollar brokers trading shares of major corporations like Amazon (NYSE: AMZN), AT&T (NYSE: T) and Tesla (NASDAQ: TSLA). But trading like a pro doesn’t necessarily require millions of dollars of free capital in your brokerage account. They also look for a few penny stocks to buy now that offer both variety and diversity. Everyone wants to know how to find the best penny stocks, but those same people are often not committed to the intensive research that’s required.
Penny stocks, occasionally referred to as “micro-cap” or “nano-cap” stocks are low-value stocks representing smaller companies traded on the stock market. As the name suggests, these stocks are often priced under $2 per share — making them much more accessible to new penny stock investors or those with less capital. Take a look at some of the best penny stocks right now.
Quick Look at the Best Penny Stocks:
|Arisz Acquisition Corp. - Right
|Advent Technologies Hldgs
|WANG & LEE Group
|Keyarch Acquisition Corporation - Rights
|Lakeshore Acquisition II Corp. - Rights
|Trailblazer Merger Corporation I - Rights
|A SPAC I Acquisition Corp. - Right
|SMX (Security Matters)
|Concord Medical Services
|Global Blockchain Acquisition Corp. - Right
|Fangdd Network Group
|CURO Group Holdings
No matter if you’re day trading penny stocks or you’re looking for stocks under $10 to add to your long-term portfolio, you need to open a brokerage account before you can begin trading. Your broker will carry out buy and sell orders on your behalf, as traders can’t buy or sell stocks directly on the market. Plus, they can help you learn how to find penny stocks on your own, allowing you to participate more actively in the construction of your portfolio.
Consider Benzinga's favorite brokerages and penny stock apps.
What Are Penny Stocks?
Penny stocks are stocks that trade at a very low price, typically below $5 per share. They are often issued by small or newly established companies with low market capitalization. Penny stocks are considered to be highly speculative investments and are often associated with high risk. These stocks are typically traded on over-the-counter (OTC) markets or on smaller stock exchanges.
Penny stocks are known for their volatility and can experience significant price fluctuations in a short period of time. They are often targeted by traders looking for quick profits, but they can also be subject to scams and fraudulent activities. Due to their low price and potential for large gains, penny stocks can attract novice investors seeking to make significant returns, but they also carry a higher risk of loss.
Features to Look For
Yes, you’ve found the best penny stock of the day, but they are not all equally good investments. Penny stock trading is risky by nature — but you can limit your risk. When searching for penny stocks to buy now, look for these 5 key features:
Trades on a Major Exchange
Most penny stocks are sold on OTC markets or through the OTC Bulletin Board. Though these shares are usually very cheap (often trading for pennies on the dollar) they also enjoy much lower levels of oversight. If you’re buying your first penny stocks, begin by searching for stocks on major exchanges, like the NYSE or NASDAQ. Stocks listed on these exchanges must meet minimum requirements set by the Securities and Exchange Commission, which greatly reduces the likelihood that you’ll get caught up in a scam.
The Company Looks Legitimate
Any company in which you choose to invest needs more than a Facebook page or social media account to herald its online presence. Check the news for information about the company, and even search for consumer reviews. This type of information lets you know if the company is worth your time and money. Yes, OTC penny stocks are attractive, but you must be certain that the company is not only legitimate but viable.
Find the Catalyst
You need to know why the stock is rising in the first place. Look for a product announcement or something major that would give you an idea of why the price is rising or falling. While researching the company, you might uncover an aforementioned “pump and dump” scheme. If you buy in and get out quickly, you can make money. If you aren’t prepared for such a scheme, you could easily lose your money.
A High Daily Trading Volume
Many investors look to high trading volume in the hopes of earning money by swing trading or day trading. However, what some people forget is that if you want to sell a stock, there needs to be someone on the stock market willing to buy it. Use a stock screener to search for penny stocks with higher average daily volumes. A higher volume will help you sell off your stocks when you choose — not when prices are at rock bottom.
A Positive Earnings per Share
A stock’s earnings per share (EPS) value is equal to the current earnings of the company divided by the current number of shares outstanding. If possible, look for a stock with a positive EPS value — this indicates that the company is currently profitable.
Most penny stocks represent smaller or newly formed corporations, so this may not always be possible. If you do decide to invest in a stock with a negative EPS value, make sure that it has a manageable level of debt and a reasonable share price.
Should You Invest ?
Investing in penny stocks can be exciting. With a wide range of industry options, higher volatility and hundreds of stocks under $20, it’s easy to see why so many investors are drawn to the opportunities that penny stocks represent. However, it’s also important to remember that penny stocks are very risky — and they should never make up the majority of your portfolio.
Try not to fall into the false narrative that companies like Apple and Microsoft were once penny stocks. That is simply not true. The Microsoft IPO was priced at $21.00 — in 1986. Remember to use total market funds and index funds as the basis of your portfolio because they are tried and true while a bundle of penny stocks is not. This will leave you room for growth while also protecting your future.
Don’t be afraid, however, to invest in a few of the best penny stocks and hope they increase in value. Monitor these stocks closely so you can sell them off if they drop or rise quickly. While a stop-loss order can prevent losses, a stop-limit order can secure quick profits.
Penny stocks are great for beginner investors that want to learn more about the markets.
How to Invest
Timing the market, entering and exiting at the right time is always ideal when you trade penny stocks. Traind through a penny stock app can help traders identify potential gainers quickly and easily on the go.
If penny stocks are part of your game, you may want to learn how to trade professionally through technical analysis for you to get in at a swing low, retracements, breakouts or along with price action setups as confirmation to increase your profitability. More than choosing the best penny stocks for 2021, you need a strategy that’s tried and true.
We’ve got established trader Ezekiel Chew founder of Asia Forex Mentor, who makes 6 figures a trade, and trains the bank traders behind the scenes, to share with us how to be successful in trading and investing.
Ezekiel believes there are three key aspects to successful trading:
1. You’ve first got to learn how to read the charts. And one of the best ways to learn this is through price action; the technique that the majority of professional traders use. Once you have learned how to read the charts, you will know why the market is going up, down or sideways and then will you recognize which strategy to put into play in that direction.
2. Trade with a proven trading strategy or a combination of strategies. A proven strategy is one that is comprehensively back-tested and has been shown to work consistently. It is only in this way that you will have the confidence to stick with it during the lull periods.
3. Have a solid trading system. One that is defined not only by the technical aspects but also by the business behind trading; a properly structured trade that is in line with the overall trading plan that has been proven to work. In contrast to what most new traders think, trading is not just about strategies, but the system itself also contributes greatly to becoming a successful trader.
If you want to learn the precise trading system that Ezekiel uses to make 6 figures a trade and that he uses to train banks, check out the Asia Forex Mentor One Core Program, which has turned many new traders into professionals. You can also create your own strategy, seek out legitimate penny stocks and diversify your portfolio.
Revenue Growth for Investors
Investing in penny stocks can be a great way to diversify your portfolio and potentially earn high returns. It is always important to do your own research and understand the risks associated with making investments of any kind.
When looking for the best penny stocks to invest in today, it is essential to investigate companies carefully and ensure that you are comfortable taking on the risk. It can be helpful to look for stocks that have a lower price per share, solid financials, and stability within their industry. You should also pay attention to news about specific companies to get an idea of their potential upside or downside. You may also want to research the management of penny stock companies to gain an understanding of corporations’ operational performance and/or future goals.
Be sure to add these stocks to your penny stocks watch list! To find other top-performing cheap stocks see below:
- Stocks under $5 (Assumes price greater than $1)
- Stocks under $10 (Assumes price greater than $5)
- Stocks Under $20 (Assumes price greater than $10)
Frequently Asked Questions
Can you get rich off penny stocks?
You cannot get rich off penny stocks, but you can diversify your portfolio with a few penny stocks.
How can I invest $1000 in penny stocks?
If you plan to put $1000 into penny stocks, you must spread your purchases across several stocks in many different industries.
What are penny stocks?
Penny stocks are stocks that sell for under $5.
What is a good market cap for a penny stock?
A good market cap for a penny stock can vary depending on individual preferences and risk tolerance. However, generally speaking, a market cap of under $300 million is often considered typical for penny stocks.