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Penny Stocks, How To Buy Them, & Frequently Asked Questions

How to make money with penny stocks and how to trade penny stocks
The post Penny Stocks, How To Buy Them, & Frequently Asked Questions appeared first…

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What Exactly is a Penny Stock?

A penny stock refers to the stock of a company that is priced under $5 per share. Contrary to popular belief, not all penny stocks belong to small or emerging companies. In fact, several of these stocks are associated with companies boasting market capitalizations in the billions. Moreover, a significant number of penny stocks are listed on renowned exchanges, including the NASDAQ and the New York Stock Exchange.

Clients of penny stock brokers, such as Robinhood & Webull, often appreciate this fact. These platforms predominantly restrict their users to main listings. A common misconception among beginner traders is the assumption that penny stocks are exclusively traded Over The Counter (OTC). However, this is a myth. When defining penny stocks, it’s essential to concentrate on the stock’s price rather than the exchange it’s traded on.

Evaluating the Worth of Penny Stocks

Determining the value of penny stocks requires a deep introspection of one’s trading strategy. Are you inclined towards high-risk trading? Can you manage and navigate through volatile trading scenarios? If your investment philosophy leans more towards long-term holdings, penny stocks might seem daunting.

– What Makes a Successful Penny Stocks Trader?

The rapid pace at which traders can either profit or incur losses with penny stocks has been a topic of debate among investors for years. The key takeaway is that there are multiple avenues to profit from penny stocks. However, approaching penny stocks with a gambling mindset is a guaranteed strategy for failure.

Before diving into penny stocks, it’s crucial to understand the nuances of day trading and familiarize oneself with the tools and strategies that can ensure consistent market gains. Penny stocks offer an excellent opportunity to capitalize on market volatility with minimal investment, but mastering day trading is the key to unlocking its potential.

Penny Stocks and the Art of Day Trading

While the price of the stock is paramount, it’s also essential to consider the exchange when day trading or investing in penny stocks. Every exchange has specific criteria that companies must meet to remain listed. These can range from maintaining a minimum share price to ensuring transparency in their financial disclosures. OTC penny stocks, in particular, have more lenient listing requirements compared to their NASDAQ and NYSE counterparts.

Day trading penny stocks requires meticulous planning and strategy. It’s not as straightforward as buying low and selling high. Traders need to analyze technical indicators, stay updated with company news, and review financial statements. Additionally, understanding the liquidity of a penny stock is crucial. Liquidity refers to the volume of shares traded during a session and the frequency of trades. Typically, penny stocks preferred by day traders have low trading volumes, meaning they might not be actively traded daily. This sporadic trading activity can impact a trader’s ability to exit a position profitably.

Furthermore, low liquidity can result in broader spreads between the bid and ask prices. For instance, a stock with a bid price of $0.05 and an ask price of $0.10 has a 100% price difference. Purchasing stocks with such wide spreads can be risky, as the value of your position can halve instantly if someone sells at the bid price.

The Risks Associated with Penny Stocks

Penny stocks come with their fair share of risks, including price fluctuations, liquidity concerns, and exchange-related risks. Other challenges include the availability of recent and valid company information and the actions of company insiders, which can significantly influence stock prices.

– Penny Stocks: Understanding The Stock Market Landscape

Raising capital can be challenging for smaller companies, especially those with limited liquidity. Often, these companies secure funds at steep discounts, which can lead to a sharp decline in stock prices. For instance, OTC penny stocks might raise capital at discounts as high as 50% of the current market price. Such actions can influence traders’ perceptions of the company’s valuation.

Moreover, the OTC market’s relaxed reporting standards make it a hotspot for market manipulation schemes like pump and dump. While fraud exists in all markets, the OTC’s lack of stringent disclosure requirements makes it particularly vulnerable. As a trader, it’s imperative to conduct thorough research before executing any trades.

Effective Strategies for Trading Penny Stocks

In-depth Research

Before diving into any penny stock, it’s imperative to conduct thorough research on the company. Understand its financial health, the competence of its management team, its position within the industry, and any recent news or developments that might impact its stock price.

Diversification is Key

While the allure of penny stocks might tempt you to invest heavily in one, it’s wise to diversify your investments across multiple stocks. This strategy not only spreads the risk but also provides a safety net against the unpredictable nature of these stocks.

Budgeting and Financial Planning

Setting a clear budget for your penny stock investments is essential. This budget should reflect an amount you’re comfortable potentially losing, given the inherent risks associated with penny stocks to watch.

Safeguarding Investments with Stop-Loss Orders

To further protect your investments, consider using stop-loss orders. These orders automatically sell a stock when its price drops to a certain level, helping prevent substantial losses in a market known for its swift price fluctuations.

Stay Updated and Informed

In the fast-paced world of penny stocks, staying updated is key. Regularly monitoring your investments and keeping abreast of market news ensures you’re always informed and can make timely decisions.

Avoiding the Hype

It’s essential to remain grounded and not get swayed by the hype. Penny stocks often become the focus of aggressive promotions, so base your decisions on solid research rather than succumbing to peer pressure or flashy marketing tactics.

– 3 Top Penny Stocks To Buy Now According To Insiders In August

Seek Expert Guidance

If you’re new to this realm, seeking advice from financial experts or professionals who specialize in penny stocks can provide valuable insights and guidance. With a methodical approach and the right strategies, you can navigate the penny stock market with increased confidence and a higher chance of success.

Psychology of Penny Stock Trading

Emotional Discipline

Successful penny stock trading often requires a strong emotional discipline. The volatile nature of these stocks can lead to rapid gains or losses, tempting traders to make impulsive decisions. It’s crucial to set clear goals and stick to your trading plan, avoiding decisions based purely on emotions like fear or greed.

Managing Expectations

While stories of traders making significant gains overnight with penny stocks are popular, they are the exception rather than the rule. It’s essential to manage expectations and understand that, like all investments, penny stocks come with no guarantees.

Common Mistakes to Avoid

Chasing the ‘Next Big Thing’

Many traders fall into the trap of chasing stocks that are being hyped as the ‘next big thing.’ It’s essential to do your own research and not invest based solely on trends or rumors.

Overleveraging

Given the low cost of penny stocks, some traders might be tempted to buy large quantities, hoping for significant returns. However, overleveraging can lead to substantial losses if the stock price drops.

Ignoring Fees

While penny stocks might seem cheap, trading fees can quickly add up, especially if you’re making frequent trades. Always factor in any broker fees or transaction costs when calculating potential profits.

Neglecting Research

Skipping due diligence and research is a common mistake. Always ensure you understand the company, its financial health, and industry trends before investing.

Navigating the Stock Market’s Operating Hours

Once you’ve grasped the intricacies of penny stocks, it’s time to engage with the market. The stock market commences its operations at 9:30 AM Eastern Standard Time (EST) on all trading days. This marks the beginning of the regular trading session. However, some brokers offer extended trading hours, allowing traders to engage in pre-market trading as early as 4 AM EST.

On the flip side, the stock market concludes its operations at 4:00 PM EST. Post-market trading follows the regular session, typically ending at 8 PM EST. It’s advisable to consult with your broker to understand the specifics of pre and post-market trading.

The post Penny Stocks, How To Buy Them, & Frequently Asked Questions appeared first on Penny Stocks to Buy, Picks, News and Information | PennyStocks.com.

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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19 hours ago

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March 9, 2024

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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1 day ago

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March 8, 2024

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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March 8, 2024

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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