I have been trading for about two years now and have some good experience making and losing good money when trading sub penny stocks.
My view on it now is quite simple, it’s a form of gambling, with extreme risk. I am not saying I don’t trade them, because the upside on them can be enormous.
Let’s just start with something simple, and analogy that I like to use with casino’s. You step up to a roulette wheel and decide to put your money on a number.
You have a 1:36 shot to hit your number and win 36 times your bet amount, Sub Penny Trading is quite similar, if you pick the right one, and hold on you can make bank, but more often than not, you will be wrong, and lose your bet
Let’s look at a couple examples of sub penny stocks that make a run and could make you quite a bit of money.
$ANTS $1,000 from .005 to .04 would be worth $8,000
$ATRN $1,000 from .009 to .35 would be worth $38,888
$MSLP $1,000 at .006 to .0375 would have been worth $6,250
Now these are the one in 36 shots and just good examples of the positive part of trading sub penny stocks, but take a look at these on any finance site and you will see where sub penny stocks usually go after a run like that, right back to where they were. Why? You might ask, because they are usually there for a reason.
So if you do decide to trade sub penny stocks look for the following things:
1. Lots of decent volume in the trading day, usually over $1M
2. Watch the level 2 screen and see how tight the spread is, the tighter usually the more liquid the sub penny stock will be, which allows you to get in and out.
3. A lot of people are talking about the stock online (usually a good indicator)
4. Manage your risk very very closely
5. Never risk more then you want to lose, because odds are against you
I will never risk more then $500 on any sub-penny stock trade, and here is why, its not worth the risk to me, and I treat that $500 as if I lost 50% of it right off the bat, as this will lighten the blow if I perhaps lose a quick 25% on it and take the actual loss.
The world of sub penny stock trading is not for newbies, because if you think you will win the lotto on these types of trades, you might as well go out and buy $500 worth of actual lotto tickets. Take each trade seriously and don’t listen to anything or anyone but your account balance.