Trading Sub-Penny Stocks

I've seen the recent comments on some of my blog posts and it made me wonder if people realize what type of blog I run.  90% of the stocks I write about on this blog are about sub-penny stocks.  Unlike stocks on the S&P500, no one wants to own a sub-penny stock, otherwise it would be trading for more than a penny.  I tell my subscribers that a sub-penny stock is trading there for a reason.  There is something wrong with the stock that makes it unattractive... at least to some people.  To others these stocks are a goldmine waiting to happen.

Should you buy a sub-penny stock?  What draws speculators to them?  Quite simply the potential for returns in excess of 1,000%.  Just look at two of my recent stock picks VCTY and SSWC.  They have gone on to return in excess of 2,000%.  Where else can you find those type of returns in such a short span of time?

The flaw with these stocks is that they almost always come down off their highs.  While a stock trading on the Nasdaq has mutual funds and hedge funds buying shares, most sub-penny stocks are purchased only by retail investors.  Goldman Sachs has yet to put a penny stock on its conviction buy list.  Citigroup is not using its taxpayer, bailout funds to put a floor under the penny stock market.  Essentially penny stock traders are on their own.  There is nothing there to artificially prop the market.  People are either buying the stock or they aren't.

What does this mean?  It means sub-penny stocks are highly volatile trading vehicles, not investments.  They can fall a lot quicker than they go up and they can take your money quicker than it took to open that new brokerage account.

How do you make money trading sub-pennystocks?  Quite simply you need to be buying before the stock goes up, which isn't as easy as it sounds.  Since stocks can perform reverse splits there essentially is no bottom.  How do you find that bottom?  How do you find that stock ready for a 1,000% gain?  If I told you that I'd be out of a job.

What I will say is this.  These sub-penny stocks almost always go down.  The trick is buying them before they go up and selling before they start going down again.  The anonymous posters on my blog claim I am a pump and dumper, when in fact, if they knew what I was talking about, would realize that I am just good at finding these stocks that are ready to mount a counter-trend rally.  I will have more on this in the days and weeks ahead.