How to Begin Investing in Penny Stocks
Penny stocks often get a bad rap, primarily due to their portrayal in the media such as Leonardo DiCaprio's character in The Wolf of Wall Street. Despite the stigma, not all penny stocks are laden with risk. In fact, some of them bear the potential to offer considerable returns at a minimal cost. To successfully trade in penny stocks, a combination of comprehensive research, sharp trading skills, and practical experience is essential. Here, we present four compelling reasons to consider penny stocks as a trading option.
Reason #1: Affordability of Penny Stocks
Renowned stocks such as Apple, Google, or Tesla come with hefty price tags. Consequently, traders require a substantial capital to secure meaningful returns. In contrast, penny stocks are far more affordable, offering the potential for larger returns, albeit at higher risks.
Let's imagine you have $1,000 at your disposal. You could purchase a single share of Tesla. For a 50% profit of $500, the Tesla share would have to climb to $1,500, a scenario that may take considerable time. Alternatively, with the same $1,000, you could buy over 600 shares of a penny stock trading at $1.50 per share. If this penny stock were to jump to $2 per share, you would make the same $500 profit, potentially in a single day.
Reason #2: Empowering Penny Stock Research with Advanced Tools
True, penny stocks are frequently linked to small-cap firms with limited access to financial details and a short managerial track record. This reality could pose challenges for traders in conducting comprehensive due diligence. However, advanced tools can significantly simplify the process of evaluating penny stock companies.
Consider Tickeron, for instance, that provides a suite of fundamental analysis metrics applicable to diverse stock types, penny stocks included. Leveraging artificial intelligence (AI), Tickeron automates this analysis, effectively streamlining the process.
Accessing Tickeron's tools is straightforward. Just navigate to the Screener Home page on their website, opt for Penny Stocks, and explore an array of AI-powered fundamental analysis metrics.
The analytical approach at Tickeron transcends basic usage of P/E or price-to-sales ratios. Instead, by utilizing sophisticated algorithms, Tickeron delivers a more in-depth analysis, offering traders insightful metrics to make informed decisions.
The Outlook Rating is derived from examining the proportion of rising to falling daily volumes over the past month.
The Valuation Rating is calculated using a proprietary formula that factors in traditional fundamentals to generate an AI-estimated price per share. By comparing this estimation to the current stock price, it identifies if the stock is over or underpriced. According to Tickeron's AI, a rating of 1 indicates a substantially undervalued stock.
The Profit vs Risk Rating gauges a company's performance by assessing the balance between profit, volatility, and drawdown.
The SMR (Sales, Margin, Return on Equity) Rating applies a comparative analysis of weighted sales, income margins, and return on equity values against the S&P 500 index constituents. The distinct weighted SMR value aids in pinpointing companies with robust and profitable operations.
The Price Growth Strength Rating is determined through a comparative analysis of stock price shifts over the last year relative to S&P 500 index constituents. It defines short-term positions by ranking price changes over 1 or 3 months, while long-term positions assess price changes over 6 or 12 months. A rating of 1 denotes peak price growth, while 100 signifies minimal growth.
Lastly, the P/E Growth Rating is computed through a comparative analysis of a stock's P/E ratio growth over the previous year against S&P 500 index constituents. A rating of 1 suggests maximum P/E growth, while a 100 rating indicates minimal growth.
Tickeron's AI platform presents a comprehensive array of technical analysis indicators, incorporating patterns and established indicators such as Bollinger Bands, Moving Averages, and Stochastics. By using Tickeron's Screener, traders can evaluate stocks and classify them based on their selected fundamental or technical analysis indicators.
With Tickeron's groundbreaking methodology, the task of researching penny stocks is considerably simplified.
Reason #3: Utilizing Volatility as an Ally
Penny stocks are often characterized by high volatility, a factor that, when harnessed correctly, can work in favor of the trader. Despite the potential for substantial price fluctuations, volatility can be a trader's closest ally.
To illustrate this point, we used Screener Home to select Penny Stocks and sorted them by daily volume, seeking penny stocks with significant volume over the past month. The following snapshot shows what Tickeron's A.I. generated:
In the previous month, a variety of penny stocks have witnessed considerable price volatility, with some experiencing changes from -90.9% to +135.45%. Given their low pricing, minute shifts can lead to substantial profits or losses for traders, irrespective of whether they're buying or selling. Consequently, it's crucial for traders to meticulously examine multiple data points and cross-reference them with a variety of indicators, both fundamental and technical. They should also harness volatility to their benefit. Tickeron provides all the essential tools to accomplish this objective effectively.
eason #4: Risk-Free Practice Trading of Penny Stocks
Tickeron provides a platform for both beginner and experienced traders to safely practice penny stock trading via our "Paper Trading" feature. This tool allows traders to try out our unique indicators and artificial intelligence technology in crafting a trading strategy tailored to their individual preferences. To access this feature, simply visit the Tickeron Home Page and select "My Paper Trades." Here, you can establish a portfolio made up of stocks, ETFs, or mutual funds and keep track of your development over time.
For newcomers to Tickeron, there's a concise 2-minute video tutorial available that instructs you on how to build and handle a 'virtual portfolio' through a few straightforward steps. Moreover, as you use Tickeron's Screener to explore trading prospects and evaluate an assortment of penny stocks, you'll spot a "Paper Trades" symbol adjacent to each ticker symbol. This enables you to smoothly add your chosen stock to your online portfolio.
Penny Stocks: A Risky Investment, But with Trading Tools You Can Minimize the Risk
Investing in penny stocks carries greater risks compared to investments in major stocks listed on prominent exchanges like the Nasdaq and NYSE. However, thorough research, meticulous due diligence, and the right trading tools can guide you through the volatile landscape of penny stocks, potentially leading to significant gains.
Before venturing into the realm of penny stocks, it's prudent to craft a robust trading strategy and acquire hands-on experience. Tickeron's Paper Trading feature empowers investors and traders to construct simulated portfolios and conduct trades utilizing the platform's fundamental and technical analysis indicators. Over time, you can fine-tune your strategy, ascertain the most effective indicators for your trading style, and even pinpoint specific penny stocks as potential trading targets.
Keep in mind, penny stock trading isn't suitable for all investors due to its high-risk nature with potential for substantial gains or losses. If you're ready to confront these risks, it's essential to utilize as many tools as you can to guide your trading decisions. Tickeron offers a variety of tools designed to aid in making informed decisions, aiming to mitigate your risk in the penny stock market.
Tickeron's Offerings
The fundamental premise of technical analysis lies in identifying recurring price patterns and trends, which can then be used to forecast the course of upcoming market trends. Our journey commenced with the development of AI-based Engines, such as the Pattern Search Engine, Real-Time Patterns, and the Trend Prediction Engine, which empower us to conduct a comprehensive analysis of market trends. We have delved into nearly all established methodologies, including price patterns, trend indicators, oscillators, and many more, by leveraging neural networks and deep historical backtests. As a consequence, we've been able to accumulate a suite of trading algorithms that collaboratively allow our AI Robots to effectively pinpoint pivotal moments of shifts in market trends.