trading penny stocks

How to make millions trading penny stocks? Surprisingly that’s quite a common question nowadays. With high inflation rates and tough times all over the world, people need to learn how to make money. This looks like a complicated topic but it is extremely simple if you take it step by step. The first step is learning all about penny stocks and the right way to trade them! Read along for a step-by-step guide to trading penny stocks like a pro and don’t forget to subscribe to our 100% free alerts to get the hottest NYSE and NASDAQ penny stocks daily!

What are Penny Stocks?

Any stock that trades under $5 is a penny stock, whether it’s listed in the OTC, NASDAQ or NYSE market. In fact, it’s very common to see penny stock traded in centralized stock exchanges.

But why do many investors prefer to trade penny stocks rather than companies in the S&P 500 or any large companies in general? Simply speaking it’s easier to make money on penny stocks because they tend to be volatile. Meaning that any small change or news about the company can literally make you a millionaire overnight. Let’s take a look at some examples of what can make a stock rise up.

What are Catalysts?

A catalyst is anything that causes positive or negative changes in the stock’s price per share (PPS). For example, a company might release a statement that it’s acquiring a competitor, this will cause an increase in PPS. On the other hand, if a company reported a financial record with losses, this can result in the stock losing some of its value. 

The most common catalysts you will find in penny stocks are:

  • Acquisitions and mergers
  • Release of financial records or annual reports
  • Dilutions
  • Tier Change (when a stock rises up a tier in the OTC market or leaves the OTC for NASDAQ, etc.)
  • Investors conference
  • Changes in management 
  • Short squeeze 

You can learn more about this in Stocks For Beginners : Everything You Need To Know

Now that we know what causes a change in any stock’s value, let’s take a look at how you can start your trading journey! 

Step 1: Due Diligence (DD)

There are multiple ways for DD, to analyze a stock you can focus on technical analysis where it’s all about the stock’s price at that moment and in the past, using those numbers to project where it might go in the future. There’s also fundamental analysis where you analyze the company itself and how its operating to get to the real value of the stock. 

Technical analysis is typically used for short-term investments while good stocks by the fundamental analysis measures may take some time to pay off, thus it is used for long-term investments. No matter which approach you are leaning towards using, you have to understand the basic principles of how to gather the relevant information about a stock. 

On that note, DD is the most important step in trading and there are multiple websites that can help you research the stock you are interested in and collect relevant data. To learn about penny stocks you should check out:

  • The company’s own website to learn about its latest news and press releases
  • Yahoo Finance is also a great platform to find press releases 
  • OTC/NASDAQ/NYSE website where you will be able to find all the company’s SEC filings and the stock’s history 
  • Twitter can help you learn what other traders are thinking, just search $ followed by the stock’s ticker name and you will find hundreds of day traders voicing their opinions
  • StockTwits is similar to Twitter and all of its users primarily talk about stocks 
  • Investor Hub also can be used to learn what other investors think and many people share their own DD at Investor Hub which might be helpful to look at and see other perspectives. 
  • Trading View can be used for a technical analysis (This website might be somewhat complicated at the beginning but you just need to know the important indicators to look for. First off, Trading view gives you a chart of the stock’s price since the Initial Public Offering (IPO) – the day the company’s stocks are first traded-  till the current date. We recommend you also take a look at the RSI, accumulation/distribution and MACD indicators.)

You can also walk the extra mile and research macroeconomic trends – for example inflation, pandemic or natural disasters –  and the industry of the stock you want to purchase and how it’s been performing before you invest. To get some context, you should look at how the company fits into the bigger picture by comparing its numbers and with industry averages and other companies in the same industry.

Step 2: Choose a Budget

By a budget, we don’t mean how much money you are willing to trade, when you are setting an investment budget consider how much money you can afford to lose. Always keep in mind that any money invested can be money lost.

Step 3: Open a Brokerage Account

Now that you know what stocks you want to trade and how much you are willing to pay, it’s time to set up a brokerage account. There are many online platforms that allow you to easily trade from the comfort of your own home. For instance, you can use Fidelity Investments, TD Ameritrade, Interactive Brokers or Merrill Edge.


The last step is subscribing to our free alerts so we can further help you learn about penny stocks! Now you are ready to trade and make millions trading penny stocks!! 

In conclusion, doing your due diligence by researching every possible positive or negative catalyst a company might have is essential before investing and remember that when it comes to investing in penny stocks, be cautious of every decision you make. 

If you blindly look up and trade stocks the way 99% traders do, you might miss out on huge potential returns from companies with great catalysts, that’s why once again we are emphasizing on the importance of doing our own research before investing in any stock.

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