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3 Rules for Successful Penny Stock Trading

Written By Briton Ryle

Posted December 17, 2014

pennystock17Just a few days ago, he was a whiz-kid that made a fortune trading penny stocks.

Today, he’s just another fraud.

Seventeen-year-old Mohammed Islam hit the news streams last week after it was announced he had amassed a $72 million fortune trading penny stocks. But it turns out, it was all a big lie.

Of course, I don’t fault Islam. He’s a stupid kid doing what stupid kids do. I did much worse things at his age. The only difference is none of it was covered by the media.

Regardless, Islam is now being paraded around as some kind of sinister conman that duped the press and the public. But that’s unfair.

If you believed the story, then that’s on you. And if you were one of those people who was trying to track this kid down for advice, then I have a shiny new bridge I’d love to sell you.

Unrealistic Expectations

In the world of penny stocks, no one’s pulling in $72 million.

That’s not to say you can’t generate some serious wealth trading penny stocks. It happens all the time. But if you set yourself up for unrealistic expectations, you will be disappointed.

I’ve been playing penny stocks for a long time. I’ve had my ups and I’ve had my downs. But through it all, I’ve always come out ahead because I consistently exercise caution and good judgment.

Some say fortune favors the daring. And that’s true. But it doesn’t favor the foolish.

If you think you’re going to become a millionaire by trading penny stocks inside of a couple of years, you’re nuts. If it were that easy, we’d all be millionaires.

The truth is, if you want make money in penny stocks, you have to be disciplined and realistic. You should also follow some basic rules that have proven to be integral to wealth creation for penny stock traders.

Rule #1 – Don’t believe the hype

If it sounds too good to be true, it is.

You’re not going to invest $1,000 in a penny stock tomorrow then cash out a month later with $750,000. It’s not going to happen. It never happens.

I get the urge, too. We all do. But don’t let greed trump reason. A simple calculation will show you just how ridiculous it sounds to suggest you’ll turn $1,000 into $750,000 – with a penny stock – in 30 days.

Rule #2 – Take the Money and Run

You don’t get rich with penny stocks by sitting on them after a huge surge in share price.

The great thing about penny stocks is that, if played right, you can generate double-digit gains in a very short amount of time. But just as quickly as those gains can add up, they can also fall hard, turning your fast gains into fast losses in a matter of hours.

I know sometimes it’s hard, as the quick calculations in our heads can put huge dollar signs in our eyes. But don’t be blinded by greed. Just be motivated by it. You know the old saying: Pigs get slaughtered!

Rule #3 – Commit!

Penny stock trading is not something designed for people who just want to invest in something then walk away.

If you’re not connected during trading hours, not to mention pre-market and after-market, you’re putting your wealth creation strategy at risk. This is why penny stock trading really isn’t for everyone.

Successful penny stock traders are flexible, nimble and ready to act within a moment’s notice. Sometimes buying and selling opportunities can only last for a few minutes. If you’re not ready to pounce, you’re not ready to trade penny stocks.

These rules aren’t hard and fast, but they are rules by which I live and prosper. They have served me well for more than a decade, and I maintain that they can help you build incredible wealth with penny stocks.