Anyone here trading penny stocks? My budget would be around 20k.
Any advice where and how to start, broker..? Would like to try US market.
Looking for buying short, long etc..
Thanks
Penny STOCKS
Urko on 26/08/2014 - 12:16
Comments
Penny stocks are extremely risky, if you buy a 1 cent stock and it drops to 0.5 cents thats 50% of your money gone, then again it could go up. Beware of the penny stock investment schemes that say they can make you thousands of percent, many of these market companies who don't even turn a profit they go up when they promote them then hit the shit after awhile because people realise it's a worthless company.
and if it goes down 50% it has to go up 100% just to get your money back.
Just to quickly rain on your parade -
Brokerage: Probably not the cheapest, but CBA shows costs of $US65 or 0.75%, which ever is the greatest, per trade. CBA
Currency Risk: No use actually being successful in trading, only to see your profits evaporate due to currency movements.
Taxation: No discount on capital gains held for less than 12 months. Budget of $20k maybe much to low to be classed as a trader. IE to offset your losses against your real income.
Time: Have you got the time to monitor this stuff and execute it in a different time zone.
Probably better to stick to highly speculative Australian mining stocks - cheaper to lose money locally.
Also plenty of history to learn from AFRI used to trade small caps a couple of years ago. This robbed me of my sleep, my ability to leave my desk or go out to lunch. Every waking moment was consumed with the thought of whether a particular penny dreadful stock was going to go up or down.
And as someone else pointed out, the brokerage rates are a real downer. Your ability to succeed in small caps depends on your ability to get in and out of positions quickly. If you are paying two lots of brokerage to buy and sell it makes it that much harder to turn a quid.
If you are looking to make money on speculative trading, you are probably better of trading CFDs locally than trading penny stocks. More information and much better regulated.
I've heard good things about Jordan Belfort at Stratton Oakmont. I would try him first ;)
No, you want someone that is winning, with tiger blood, Bud Fox is the man.
The quote from Leonardo diCaprio on the side of the bus did for me. Where do I sign?
So would be smarter to try Australian market first…
Are etrade or bell direct any good…
I always wanted to trade with stocks…get the feeling how it all works…Would like to try something like instant money or instant lossWhat would be smarter is to take the advice of those listed above and steer clear until you are comfortable you know what you are doing, or you can handle the pain/stress as @paizuri points out. You come across as someone who is a tad reckless with money and 20k wont mean much to you if you lose it. Sorry to be harsh but that's how it sounds. If you want instant money or instant loss best try the local casino mate. Even penny stocks can stay stagnant for months or even years so you wont get instant gratification. If you want to do this right, play the game for a few months using a virtual account. See how quickly you'll lose your 20k without actually losing it.
You can tell I am a noob :)
Well I've got time at the moment and was thinking doing something with 20k…might just buy few silver or gold bars instead
Thanks guysIf your aim is instant win/loss, then currency trading is the fastest moving market with the greatest leverage offered.
Mate,
Sorry if we were all a bit harsh. If you really want to have a play, open up an account, I think nabtrade charges 15 dollars which is cheaper than etrade (from memory).
When I traded small caps, I read voraciously, all of the gossip at the Sydney Morning Herald forums, googled all the financial news, snagged a free membership at Intelligent Investor, etc.
Open up an account and start with small trades, maybe $500 here or there. You'll soon find out whether you like it and/or whether you've got a head for it.
Don't assume that bullion (gold/silver) is safe. Goldman Sachs say that gold will go down to $1000 USD/oz by the end of the year and they may well be right.
Gold is at a low price and has been dropping a lot in the past year, gold isn't the safest option anymore like it used to be so be careful.
I commented before, but thought I should just weigh in. Even though I'm not a financial advisor, I have enough experience with investments and I studied Finance at university, so I'm not making any of this stuff up.
Firstly, with your amount of money, $20,000, your ONLY strategy to make LONG TERM gains is a buy-and-hold strategy. Why? Because with that amount of money, if you're spending $15 per trade and you're only making a couple of % per trade, then you'll be making a loss. So unless you have something like $200,000 - $300,000, it makes little sense to day trade.
So if I have $20,000 what would I do? I would invest it in a market index, such as the ASX200, which is what I do with my own money. This gives you stable returns, reasonable growth and most importantly, very low risk. When you invest, you should always invest in a diversified portfolio as stocks never move in perfect correlation, meaning that you will be reducing your risk if you diversify.
Secondly, I know most financial investors are not believers in market efficiency, but I believe that over the long term, markets are efficient. What this means is that over a day, or two days, perhaps there are lots of chances where you can "beat the market" (return higher than the ASX200 for e.g.), but over the long term, it becomes extremely difficult to "beat the market", which is shown easily enough by the fact that very few mutual funds actually outperform the ASX200 on a regular basis. Of course hedge funds and other large institutions can beat the indices more often than not, but they have access to high levels of leverage that you, myself and mutual funds do not have access to.
When you talk about "trading", you're not talking about "investment", you're talking about what is known as "gambling". Why is this? This is because when you invest in a market index such as the ASX200, your money will grow in the long term. I'm not saying that the market never goes down, but look at the ASX200 index over the last 20-30 years or something and you'll see what I mean, that there is a persistent upward trend. Investing is making educated decisions and unless you actually have the analytical power of a fund, the ONLY way to invest is through a proxy for the market index, such as an ETF. You simply CANNOT beat the market on a consistent basis because you don't have an informational advantage over other investors.
Trading penny stocks is almost a scam and shouldn't be allowed, their volatility is extremely crazy. You're better off learning how to play poker and going to the casino and playing poker for a living, penny stocks are actually THAT volatile. To dabble in them and make day trades when you simply know less than other investors means that you will simply lose your money.
My favourite analogy is always this. Think of it as a game of blackjack (21). I'm not sure how much you know about blackjack, but google simple strategy for blackjack if you're not sure what I'm talking about. Essentially, there is a set of rules which let you know whether you should hit or pass given your cards and the dealer's card. If you choose to play by this strategy, in the long run, you will break even. If you deviate from this strategy, unless you have extra information (e.g. card counting), then your expected return is negative. It's the same with the stock markets, if you just invest away from the index, you're deviating away from the mathematically correct strategy, and if you don't have extra information, again, your expected return will be lower than that of the market.
Wow, very well said Paul!
Sundance Energy SEA perhaps
I traded all kinds of stocks including penny stocks. Problem and advantage of penny stocks is that any penny stock is usually heavily manipulated.
If I could give you only one advice it would be: "Go against the crowd". If everybody around cheers for a particular stock - run immediately. Most likely some manipulation is happening and smart money is selling the hype while dumb crowd is buying.
Try playing with it without real money for a while. That is, mark some stocks pretend to buy and sell them, allow for trading fees etc and see how much time it takes, how much money is possible before you bite the bullet and use real cash.
They used to do this in the Sunday papers. Offer pretend $10k to half a dozen people and see who came out better off after a few weeks. Interesting outcomes, I think often it was the school kids or stay at home mums that came out best off.
Wouldn't be surprised, school kids have a competitive streak and stay at home mums have more time. I doubt other people who are busy would put much time into doing those things seriously.
To get started as paulsterio suggested is looking at an index fund such as STW top 200 shares, VAS top 300 shares, SFY top 50 shares, put some money in one of those or just look at the blue chip companies so you get a feel such as CBA, ANZ, BHP, RIO, WBC until you learn the ropes. To really learn how to trade it will take many years but just buy one stock such as WBC and then look at the share price each day and start reading the financial section in the newspaper and online :) . You can also trade online with fake money quite a few sites do it.
it funny how every call it either "investing" or "gambling" but it all fall under "speculating"
with $20K I would spread it around with different market and different Idea
I would do
$500 in bitcoin
$500 in forex account (so you can learn and understand it, play around)
$5,000 in long term managed investment like manged funds or held with a broker firm that trade for you.
$10,000 I would hold in a saving account ready for property investment, (even shared investment with friend or family , or Property manage fund)Remaining $4,000 place in a saving account ready for raining day when the next break through investment idea come out
If you're really wanting to win/lose it all and have the time to "invest" and learn day trading… I would suggest a different investment of your time with perhaps similar risk.
Learn to play poker (not against the house like blackjack where all you can hope to achieve is to win 49.9% of the time and break even, but a multi-player game like hold'em).
At least you'll be learning a fun skill while losing/winning butloads of cash, and it can be done with real people where there's a larger psychological element, or test your mettle online where you can invest as little or as much time as you have, 24-7.
Compared to trading, the "fees" are built into the winnings and if you're good or lucky enough to come out on top, you can make quite a bit of profit and (up to a certain point) it counts as a hobby and is tax-free rather than an on-paper taxable investment.
I'm only half serious here, but I know a few people who make a habit of taking rich drunk kids money at the casino on a friday/saturday night. Sometimes they have bad beats and come out behind but more often than not they've quadrupled their money in one night. I've always likened this to betting on penny/volatile stocks (but a different skill so to speak)!
I guess if you don't have the time to play/learn then probably go with some of the more realistic suggestions like investing in a balanced portfolio or ASX200 or whatever. Good luck and don't forget to give us all some updates in 6 months how you went, win or lose ;)
If you want to actually invest, you're better off investing in a market index such as the ASX200 through an ETF, e.g. a Vanguard ETF.