Being a Successful Penny Stock Trader with Timothy Sykes

What is a penny stock?  Can they make you rich?  Well, it worked for our guest Timothy Sykes who turned $12,000 into $4.2 million by trading them.  Timothy took his bar mitzvah money and started trading penny stocks against his parent’s wishes. What they warned him would be a hard lesson in the value of a dollar, turned into a small fortune.  What Is A Penny Stock?  Penny stocks are stocks sold by speculative companies for under $5 per share. Penny stocks are usually growing companies that have limited cash and resources or companies in dire financial trouble, often already in bankruptcy. As such, they are much riskier than traditional stocks. You don’t trade penny stocks with the intention of finding the next big thing, rather, you’re trading momentum. If you’re wrong about a pick, get out fast. This is not a buy and hold discipline.  When a “conventional” stock is down, over time, it’s likely to bounce back. That’s not the case with penny stocks. The companies often go out of business before a bounce back can happen.  Short Selling  You can make money betting against a company too. You take a negative position and sell first, then buy. If you see a stock that you think is over valued at $10 a share, you sell it and buy it back later at $2 a share. How do you sell a stock you don’t own? You borrow from your broker. You’re betting on failure.  What Makes A Penny Stock Risky?  This all sounds good, take a small amount of money and turn it into millions through penny stocks. But nothing is that easy and the vast majority of penny stock traders lose money.  There isn’t much publicly available information on these companies and some of what you can find is from dodgy sources. Never risk disaster, don’t be sure of anything. Some of the companies are very young so there isn’t much information to be had. Many are in bankruptcy making it hard to find a fair valuation. The exchanges that these stocks are sold on do not have any minimum requirements to remain on the exchange. Because these stocks don’t have a lot of liquid