Each month over 120,000 new people are searching online for penny stocks. This has been a nightmare for the SEC to try and monitor. People are sucked in by the potential of turning a few hundred dollars cash into millions. Just like in the movie boiler room and the wolf of wall street the people getting rich off penny stocks are the people who are suckering others into buying.
95% of people trading and investing in OTC stocks will end up losing their money. However, there are 5% of people that make a killing. How do these people make money? Is it just blind luck or is there an actual strategy at play?
The first thing to realize about penny stocks is that a lot of the information they are reporting is just partial. They will report unaudited financials. They will send out a bunch of PRs to pump stocks. They will do whatever they can to make sure people stay excited and so they can attract new investors.
People who are naive and greedy come in and buy into the hype. They dream that they have found the next Monster energy drink stock. They usually find groups that support their greed and help them buy into these false hopes. They will usually spend hours hitting twitter and Ihub telling others how amazing the stock is. Within a few months, they end up broke and angry.
So how do the 5 % make their money? They look at these companies as scams. They simply play the trends. They buy when everyone is fearful and they sell when everyone gets greedy. They take 30% profit at a time and slowly build up their portfolio. The main key to penny stocks is to be smarter than the average person. Most people starting to trade penny stocks are 18-25 year old boys. Who have huge egos and some of their parent’s money to gamble with? They come in and usually make some money. They pump their chest loud and tell people they are penny stock gurus. This is short lived though. These fools get humbled quickly.
The key to trading these junk companies to put yourself in the scam CEOs and stock promoters position. Then decide how you would word PRs and spread the word so that people would get excited enough to buy your stuck but not push the limits too far where you would get in trouble with the SEC and get your penny stock halted.
If you can think like these scammers you can start predicting when stocks will crash and when stocks go up. A good example was marijuana stocks. These stocks went up 1000% a month before states like California and Arizona were voting on legalizing marijuana recreationally. Everyone wanted to load up so when the yes vote came in all the general public then would start to buy and the stock would go up even higher. What a lot of investors didn’t realize is that the price per share had already factored in a yes vote. You then witnessed a classic buy the rumor sell the news outcome. Marijuana Stocks tumbled the entire week.