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published on July 27, 2021
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Why Penny Stocks Are Volatile
Penny stocks are volatile by nature with prices gapping up and down on a daily basis. Most penny stocks don't trade on a trend where a stock is going in the same direction for more than a month.
Penny stocks are highly correlated to news, events, and rumors. If a company reports some type of good news such as company and sector growth, FDA approval, or other positive news, its stock price could move up 30%, 50%, 100%, or even more in a single day.
Most of the time, however, the rise doesn't last long. The stock either crashes 50% or more on the same day or within a few days. Imagine if a trader bought the stock during the high, and rode the trend down, he could lose all his money in a matter of days.
It is impossible for retail traders to know this type of news ahead of time and get on the trades before the stock's big move. If you happen to know the CEO of the company, and somehow learn about the news before it was released, it is still illegal to trade with insider information.
Why Trading Volatile Penny Stocks
In the long term, either the penny stock price goes to $0, or not going anywhere. Therefore, it is never a good idea to hold penny stocks as a long term investment.
However, there is still money to be made for traders who swing trade or day trading volatile penny stocks. Instead of investing based on company fundamentals, these traders buy and sell stocks based on technical analysis, chart patterns, and market sentiment.
By trading volatile penny stocks, traders have the potential to capture big gains on the short term volatility and price movements. Day traders usually clear their positions on the same day whereas swing traders may hold their positions for a few days.
How to Trade Volatile Penny Stocks
Trading is not easy, and it is not something a beginner can do. In fact, it is extremely risky to trade penny stocks. As I stated above, a beginner may lose all his money if he trades and rides the wrong type of trend.
There are many things to learn if a beginner wants to get into the trading world. Following are a few articles to get you started.
Keep in mind, it takes hard work and effort to learn how to trade penny stocks profitably. Some people take longer than others, and many never learned how to trade successfully even after a few years of trying.
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10 Volatile Penny Stocks to Watch
By using the penny stock strategy presented in the penny stock guide, we found 10 volatile penny stocks to watch.
- Oragenics Inc (AMEX:OGEN)
- Dyadic International (NASDAQ:DYAI)
- Obseva Sa (NASDAQ:OBSV)
- Eyegate Pharma (NASDAQ:EYEG)
- Sintx Technologies Inc (NASDAQ:SINT)
- Nanovibronix Inc (NASDAQ:NAOV)
- Biondvax Pharma Ads (NASDAQ:BVXV)
- NovaBay Pharmaceuticals, Inc (AMEX:NBY)
- Meten Edtechx Education Group Ltd (NASDAQ:METX)
- Allena Pharmaceuticals Inc (NASDAQ:ALNA)
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