Are penny stocks more profitable than other stocks? Before I answer this provocative question which I’m sure is on the mind of almost every investor who wants to make REAL money with the stock market, I need to explain a few things first. I need to tell you WHY penny stocks are more profitable than other stocks.

Most stock market experts will actively discourage people from trading penny stocks. They speak in “guru talk” and say things like:

1. They say they are more “volatile” than stocks that trade on the NYSE, the NASDEQ, and the AMEX.

2. They say they trade on the “pink sheets” and “bulletin boards” which are not as tightly regulated.

3. They say it is more difficult to get information about them.

You can listen to them if you want but I’m going to let you in on a secret that can make you literally thousands of dollars a month:

The 3 factors above are EXACTLY what makes penny stocks more profitable than other stocks!

If you prepared to be really patient and you’ve got the luxury of waiting 20-40 years, you can make good money trading traditional stocks. However, while you’re waiting, the best way to make good money in the short-term, and make it over and over again, is trading penny stocks.

However, there is one important caveat to the statement above. In order to make good money trading penny stocks, you must either be exceptionally good at picking the right stocks or you must very closely follow the picks by someone else who is exceptionally good at picking penny stocks.

In other words, if you’re not a penny stock guru and you want to make SERIOUS money trading penny stocks, you need to find the right person to follow and do exactly as they do. You can do this by setting up a demo account and test trading their picks to make sure they are the real deal. Once you are convinced that the person knows what they’re talking about, i.e. you have the evidence from your demo account that if you followed their picks you would have made substantial money, you can start using real money.

Now, let’s take at look at those factors above and what they mean to profitability (#1 and #3 are the most important).

Volatility is not a bad thing. It means there’s more room for profit over the short-term if you know exactly what to buy, when to buy it, and when to sell it.

“Regulation” is not always a good thing. It can actually hold a company back from doing things that would make its stock more valuable to its shareholders. Some companies that have been delisted from the big exchanges actually chose to stay “delisted” for this reason.

While it is more difficult, in fact FAR more difficult, to get information about penny stocks than stocks that trade on the big exchanges because of the required reporting, if a person DOES know how to get good information, it is not shared with so many people. If too many people obtain this knowledge, it makes the price of the stock rise so quickly it’s hard to get in low and then take profit when it rises. This is exactly why “free stock picks” are never the best picks.

Now, it takes a person with very specialized skills to get the right information and know the exact timing to buy and sell. Therefore, the easiest way most people can take advantage of the 3 factors above to make a lot of money with penny stocks is to focus on picking the right person to follow instead of the right stocks – and then copy every thing they do.

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