7 Steps To Successfully Investing In Penny Stocks Online

| January 5, 2015

penny stock tradingHow You Can Invest In Penny Stocks Online

Here we are… the start of a brand new year… and millions of traders have decided to learn how to make money trading penny stocks online.

Some will be very successful…

Others will crash and burn, blowing up their trading accounts and losing money.

Which one will you be?

If you start with a plan and stick to the plan, you have a higher chance of success.  Often times a single trade can be the difference between success and failure… so it’s important to have a plan.

After trading, watching, researching, and tracking penny stocks for more than two decades, I know there are seven critical steps to trading penny stocks…

And if you follow and understand each one, you’ll have a great idea about how the markets work, how penny stocks trade, and you’ll know how to invest in penny stocks online, giving you a huge leg-up over the competition!

So let’s jump in…

7 Steps Showing You How To Invest In Penny Stocks Online

There are seven critical steps to trading and investing in penny stocks.  These steps will teach you how to invest in penny stocks online:

  • Having the right mentality
  • Having a trading strategy
  • Using the right amount of trading capital
  • Identifying great sources of penny stock trade ideas
  • Having time to do research
  • Working with the right online broker
  • Always monitoring your penny stock trades

It sounds like a lot of things to know and understand before you even place your first trade… and you know what… you’re right!

You want to have all these things figured out BEFORE you start trading penny stocks.


Trading penny stocks is risky enough, but doing it without a plan is like taking a match to your money…

So let’s look at each step individually.

Have The Right Mentality To Trade Penny Stocks

When you’ve got a hot hand, and every trade you make is rolling in the cash, trading penny stocks is easy.  You’ll believe – WRONGLY – that you’ve cracked the code… you’ve discovered the secret to investing in penny stocks online.

The problems don’t show up when you’re winning… only when you’re losing.

That’s right.  Want to see a hard as steel penny stock trader crumble like a cheap piece of tinfoil?  Just hand him three or four losses… then watch him question everything about trading penny stocks online.

Then hand him three more straight losses and see his confidence deflate.

Two more losses and everything he thought he knew about the markets will go out the window… his trades will get erratic and he’ll start trying to win the losses back in one big trade.

Before long, his account will blow up… and he’ll be nothing but a pile of rubble.

Seriously, if you want to be trading penny stocks online for the long run, you’ve got to have the right mentality.

First you need to be strong willed enough to stick with your strategy.  Second, you’ve got to be flexible enough to roll with the losses and wins… because nobody wins every time.  Third you’ve got to know yourself.  You’ve got to know when to push your trading strategy… and when to back off.

Like Socrates said, “The unexamined life is not worth living.”

Most importantly, you’ve got to understand trading has its ups and downs and you can’t win every time.

Now that’s not the only secret to learning how to invest in penny stocks online, you’ve also got to….

Have A Solid Trading Strategy

Now I get more questions about trading strategies than anything else it seems… and this is the best advice I can give.  Pick one and stick with it.

If you’re even a little bit of a basketball fan, you’ll remember Michael Jordan – the greatest player in the NBA.  What many fans don’t realize is for a time he tried to become a pro baseball player too.

It didn’t work – Michael Jordan sucked at professional baseball.

Having a strategy to trading penny stocks online is critical… and you’ve got to pick one and know it inside out.

You can make money as a growth investor, or value investor, or dividend chaser, or turnaround specialist, or technical analyst.  The ways to make money are limitless… but you’ve got to be good enough to know that investing strategy cold.

Let me say that again… know your strategy cold.

Be a pro at one thing… and let the amateurs jump from strategy to strategy.

Now, with trading penny stocks, you can’t win with strategy alone.  You’ve got to…

Use The Right Amount Of Trading Capital

Many investors don’t think about trading capital as being critical to learning how to invest in penny stocks online, but let me tell you, sometimes it can make or break you.

Let me make a point.

Remember tip number one… having the right mentality – well the money you use needs to fit within that mentality.  If you only have enough capital for one trade, you’re going to be risking it all on one investment.   And that’s never good.

You’re going to be worried and focused on one single trade, and you won’t be prepared for the inevitable losses that will arise.

You’ve got to have enough trading capital for executing on your trading strategy too.

For example, let’s say you’re a momentum investor and you know that with your strategy, when a penny stock shows a particular setup, it wins 60% of the time.

That’s great, so on average for every 10 trades you make, you win 6 times… and the winners outweigh the losers!  That’s a successful strategy.

But if you only have enough capital to make 3 or 4 trades, you’re sabotaging your strategy.  What if the first four trades are losers and you’re out of money before the next trades produce winnings?

You must have enough capital to survive the inevitable losing streaks that occur.

You’d got to make sure your trading capital matches your trading mentality and strategy.

Once you’ve got your capital locked down, now you’ve got to…

Identify Sources Of Great Penny Stock Trade Ideas

This is an area many beginning traders first struggle with.  When you’re first learning how to investing in penny stocks online, many people don’t realize how many bad stocks they’re going to sift through.

I think for every 100 stocks I start looking at, I invest in one… maybe.

So if you don’t have a reliable source of ideas, you’ll quickly start changing your style of investing.  You’ll start buying the best of the worst stocks, and that’s a mistake.

Make sure to find some solid sources of penny stock trade ideas… I recommend the Penny Stock Research newsletter and our premium product Penny Stock All-Stars.

We’re constantly looking at the markets and share our insights and ideas with readers.

Even if you don’t follow-our ideas, find other like minded penny stock traders and share your research.  It’s a great way to learn and uncover new penny stock trading ideas.

So what’s next?

Commit Time To Research Your Penny Stock Ideas

Finding stock ideas isn’t enough.

You’ve got to look into each company and uncover the good, the bad, and the ugly.  It’s called doing your due diligence.

And you’ve got to do it on your own.  You never want to trust due diligence to others. Take the time to read about the company.  Visit their website, read their press releases, study their government filings, analyze their financial statements.

You’ll be shocked at what you uncover from your study…

And you’ll quickly learn how to identify great companies!

Now I can’t cover how to do your due diligence here… that could fill a book.  So keep an eye out for future articles on how to perform due diligence on penny stocks.

What you need to know is, it takes time… and it’s not something you want to rush.  You’re better off taking your time and doing the research and missing a move, than investing in something you don’t know about and losing all your money.

Remember, learning how to invest in penny stocks online is a process… and it takes time.

Once you’ve found a great trade and have done your research, the next step is simple…

Work With A Great Penny Stock Broker

Not all stock brokers are the same.

If you’re trading penny stocks online, you’ve got to pick the right one.  Now we don’t have an affiliation with any broker, so I can’t recommend one.

But you will want to review a few things before picking a broker…

Is their online platform easy to use?  Make sure to look at their online demo, or see if you can set up a practice account just to see how their software works… this is critical, because it it’s complicated to use, you won’t trade!

Watch their costs too.

Many brokers like to sneak in some crazy fees like trading too much… or not trading enough.

Also, make sure the broker you use can trade stocks on the OTC markets and Pink sheets.  NOT all brokers can or will trade penny stocks so make sure and ask if they do!

Finally, every year, Barron’s issues a report on the best online brokers out there… I recommend you get your hands on it, and find a great broker for you.

If you’re serious about learning how to invest in penny stocks online, you’ve got to follow this last step religiously…

Monitor Your Penny Stock Trades

This last step is critical, but many new traders forget to do it.

You’ve got to check in every so often on your investments.  No, I don’t mean you need to watch them every 10 minutes, or even every day.

But every few weeks you should be watching the stock price and news on the companies you own.

And every quarter you should review their public filings and re-evaluate if it’s still the right investment for you and your strategy.

Let me give you an example…

If your strategy is investing in growth stocks, and one of your investments starts showing financial numbers that aren’t growing… something is wrong.  You should immediately review your investment and review your assumptions about the company.

It might be time to move on.

Now You Know How To Invest In Penny Stocks Online

There you have it… seven simple steps to helping you become a more successful trader, and grabbing more winning trades.

None of these steps is particularly hard… but they all take time to implement and perfect.

Trust me, once you’ve got your arms around these seven steps, you’ll start seeing more (and bigger) penny stock wins!  And remember, the ultimate goal of learning how to trade penny stocks online is making more money!

Good trading…

Brian Kent
Penny Stock Research

BIO:  Brian Kent has been trading the markets for more than two decades and now writes and edits for PennyStockResearch.com.  You can sign up for the penny stock research newsletter a trusted source for the truth about penny stocks! Sign up today and get a free research report – http://pennystockresearch.com/free-reports/


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Category: Investing in Penny Stocks

About the Author ()

Brian Kent is the Editor for PennyStockResearch.com. He also pens Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market's next Blue Chips.