Is Penny Stocks Trading Profitable?

Is penny stocks trading profitable

There are many companies that start with small but they have the capability to give you returns much above your expectations. It includes some of the large market players that you can’t even imagine. Some companies have made substantial growth over time and are now considered large stocks. Traders can identify these opportunities and they can invest in these stocks to earn returns from the market. These penny stocks if bought at the right time can increase your investment multiple folds. Let us understand everything about penny stocks trading.

What Is a Penny Stock?

A penny stock or penny share is the one that trades in a very small value of a current. Its price can be 1 US dollar, 1 Euro, or equivalent amount per share in your domestic currency. Low investment, in other terms, can be said as the stock is highly speculative.

These penny stocks are recognised with extremely low share prices, high volatility, and higher risk. High risk is always associated with high reward and so are penny stocks also. Rather they can go very high or remain at nearly the same level for years.

These stocks seem good because even with small capital you can grab a high portion of the share in the company. Instead of buying penny stocks, blue-chip shares, sub penny stocks, invest in these shares to get maximum return. Therefore, traders should keep an eye on those penny stocks so that they can garb returns.

How to Start Penny Stocks Trading?

If you also want to make money from penny stocks trading then you need to follow this procedure. Make sure that you have all these resources and arrangements to start the penny stocks trade.

Research the Best Stocks for Trading

Trading in the penny stock market always requires homework before you start. Therefore, traders must research the best stocks for trading in the market. Select a few of the penny stocks for trading and research their finances along with past stock performance.

Find The Right Stock Brokers

Among the wide range of brokers, you have to choose the best broker that suits your requirements. Make sure to compare a wide range of brokers and then go with the most suitable one. Also, select the stock exchange because they also play an important role in trading.

Get an Account for Penny Stocks Trading

Like active traders, you also need a trading account with a broker. Remember to choose an account with lower fees to trade. This will save your expenses and provide higher returns. And also choose a trading platform on which you want to trade penny stocks and which is user-friendly.

Figure Out Whether You Want to Buy or Sell

On the basis of your analysis and studies, determine whether you need to go long or short. Figure out where you can earn the best profits and make a trade. Remember that penny stock trading can be very profitable so figure out whether you need to buy or sell penny stocks according to the price movement.

Manage Risk While Trading Penny Stocks

Before placing your trade in the market make sure that you have followed all the risk management tips and tricks. Penny stock trading or stock trading is all about putting your money at risk. But a good trader can manage the risk to fetch higher returns from the market.

Continuously Monitor Your Positions

Before investing in penny stock world determine the best trade position and size. Along with this, it is recommended to continuously monitor your stocks. Make a plan and stick to it to get the maximum results from your trades.

Market Analysis for Penny Stocks Trading

Trading penny stocks can be extremely volatile because the stock priced of these stocks fluctuates real quick. Sometimes the price fluctuations of around 20% are also very common for these penny stocks. Therefore, it is advised to conduct an in-depth analysis before you trade penny stocks.

Traders can also analyse other stocks of the same industry and their performance. In this way, you can find the best penny stocks. Study the growth of the industry and make the best decision to earn great returns from the market.

The trading volume is very low for the penny stocks and they are not traded often in large volumes. Therefore, you should also trade in low quantities to keep yourself safe from losses. Sometimes influencers can also play a big role in the price movement of penny stocks.

The prices of penny stocks can move up real quick but they come down also really quick. Trading penny stocks in the UK is extremely risky and needs a trading strategy to grab the opportunity.

Pros and Cons of Penny Stocks Trading

If you trade penny stocks you should know all the pros and cons of trading them. Read all the benefits you can receive with them and all the risks you need to take care of. Here are all the pros and cons of penny stocks trading. Let us start with the pros of trading them:

Game Changer

One of the biggest advantages of penny stocks trading is that they can be the big winner and game-changer. They can increase your money real quick. Out of some penny stocks, some are the current industry leaders.

Some of the companies have the ability to take over the whole industry. Traders need to research the market properly and then invest in the stocks to grow their portfolio.

Chasing the Thrill

It is quite easy to make 5% or even 10% profit on the stock price. However, penny stocks come with higher gains, your investment can increase to multiple folds. It can be a gamble but the returns are very fruitful.

Higher Number of Shares

With a tiny budget or trading capital, traders can get a big share of the company. You can even purchase thousands of shares with the help of low capital. If you put the same amount of capital in any other company you can’t even buy hundreds of shares.

Speedy Gain

Traders have to research before investing any amount in the market. But if your analysis is right, the stock price can turn up quickly. It can take a few days or even months but the stocks can generate higher returns.

The cons of trading penny stocks are as follows:

High Volatility

Sometimes the price of a penny stock goes up and then comes down also after touching an all-time high. Traders need to analyse before investing that at which point they have to exit from the market. The exit point is equally important as the entry point in the market.

Low-Quality Stocks

A few of the penny stocks are from low-quality companies. These companies are having low financial performance and their balance sheets are also weaker. Before you invest in a company that is generating large losses, analyse the stock.

Majority Losers

According to studies most of the small companies became losers in the longer run. They cannot generate enough returns for a trader. That is why penny stock traders need to analyse and study the market in-depth.

Risker Markets

While trading a penny stock also study that on what stock market it is listed. The market also plays an important role behind the performance of the stock. Therefore, if you are investing in one of the stocks from a leading stock exchange then it is less risky.

Stocks that trade on a lower quality stock market are riskier and you can lose your investment.

Over Valuation

It has been noticed many times that the stocks listed are valued over the value of the company. It is done to raise a higher capital from the market. Hence, traders should avoid investing in those stocks that are overvalued in the stock market.

A Few of  Popular Penny Stocks

There are thousands of penny stocks globally for trading. But in which investment is fruitful, is a question for all traders. Here are a few stocks of the UK market that you should study to find penny stocks trading opportunities.

Penny stocks often comprise small companies or start-ups which are ready to grow their business. You also need to find those companies that are having a strong business model. Sometimes they can be subsidiaries of top-performing companies or sometimes large players can be their investors.

Below listed are some of the penny stocks traded on the London Stock Exchange (LSE). The stocks are as follows:

  • Tullow Oil
  • Cineworld
  • Lloyds Banking
  • Rolls-Royce
  • Petropavlovsk

These stocks are currently traded at a very low cost in the stock market. Traders should keep an eye on them because at any time there can be a money-making opportunity in these stocks. Here are a few stocks of the market that once traded at a very high cost.

The stocks are Ford (NYSE: F), Monster Beverage (NASDAQ: MNST), SiriusXM (NASDAQ: SIRI) and Novavax. It is hard to distinguish between companies that promise to grow and that really grow.

Best Brokers for Penny Stocks Trading

If you search online for brokers in the market there are a huge number of brokers. It does not matter if you are an active trader or a non-active trader, you need the best broker. Here are a few brokers that you can consider for comparison and choose the best according to your requirements. The brokers are:


Capixal is one of the leading brokers that was founded in 2021 only. IFC Investments Cyprus Ltd is the parent or operating company of this brokerage firm. It is authorised and regulated by the Cyprus Securities and Commission Exchange (CySEC).

This broker also offers negative balance protection and segregated bank accounts to its clients. In total there are more than 350 trading instruments. They include stocks, currencies, commodities, indices, and many more.

Traders get various types of analytical and research tools to analyse the stock price of penny stocks. Use educational material to enhance your trading knowledge and generate higher returns from the market. Traders can trade on one of the best trading platforms that is MetaTrader 4.

WebTrader and a Mobile App are other options for a trading platform. Start with a demo account and you can use customer support in case of any professional assistance. You can also use the leverage offered by the broker to trade in the market.


Royal Forex Ltd is the parent company of the brokerage firm that is ROinvesting. It is authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC). The broker was founded in 2015 and it is one of the interactive brokers.

Traders can choose from a wide variety of trading assets that include stocks, indices, currencies, commodities, and more. You can trade on the globally recognised MetaTrader 4 trading platform. There are WebTrader and Mobile App powered by MT 4.

Choose a trading account as per your choice from silver, gold, platinum and a demo account. Traders can enjoy commission-free trading with low swaps and spreads. Use the research tools and educational material to enhance your profits in trades.

Traders can use trading leverage and they can start trading with $250 dollars of minimum deposit. Trade penny stocks, generate higher profits and get 24/5 customer support in case of any issues. It is one of the best brokers for penny stocks.

Global TradeATF

Global TradeATF was founded in 2013 by the company named Bayline Trading Ltd. It is authorised and regulated by the International Financial Services Commission (IFSC) of Belize. This makes it a well-regulated broker for trading in the financial markets.

It offers more than 350 trading instruments such as stocks, commodities, currencies, indices, and many more. A trader can choose an account from various accounts that are silver, gold, platinum, and a demo account.

Use the various types of research tools and analytical tools to enhance the possibility of earning profits from your trades. Traders can trade the best penny stocks here and many other instruments. Get 24/5 customer support from the broker in multiple ways.

Trade on the best trading platforms that are MetaTrader 4, WebTrader, and Mobile App powered by MT 4. It is a commission-free broker which charges swaps and spread charges as per the trading instrument used for trading. The broker also offers high trading leverage for traders.

The Bottom Line

Penny stocks trading can be profitable but traders need to study the market and the performance of the company. It is recommended to invest a significant amount in that stock to avoid the high risk of losing your trading capital. Your entry in the stock and exit should be perfectly timed to gain the returns from the stock. Choose a broker among the best brokers to fetch the maximum benefits and returns. Day Trading penny stocks might be risky for beginners. You should trade this carefully with proper trading guidance under your stockbroker.