Turn Pennies Into Dollars With Oil Penny Stocks

Whether you’re just starting to trade or you’re a seasoned investor, penny stocks can be a great way to make some money for fairly cheap. Oil penny stocks, specifically, are a great way to turn a particularly impressive profit. Though high yields are possible with oil penny stocks, it’s important that you read up on the market and companies before getting started.

What Are Oil Penny Stocks?

Image via Flickr by joncutrer

Oil penny stocks are stocks of small companies in the gas and oil industry that cost less than $5. These stocks have low share prices, but they have incredible potential for profitability, allowing you to maximize your premiums. There are short, medium, and long-term investment opportunities for these stocks.

How Are Oil Penny Stocks Different From Regular Stocks?

Generally speaking, oil penny stocks are considered the wild frontier of Wall Street,
taking investors away from the normal coverage and glamour found from trading on
major markets. Some of the unique characteristics of oil penny stocks are that they:

• Are traded on over-the-counter markets: Penny stocks are usually traded on
  the OTC markets instead of being listed on the New York Stock Exchange and
  NASDAQ. Pink sheets are a listing service for trading on OTC markets, and oil
  penny stocks often rely on this platform.
• Have a large bid-ask spread: It’s pretty common for oil penny stocks to have a
  wide discrepancy between their bid price and their asking price. In other words,
  investors are usually willing to buy an oil penny stock for a lot more than they
  would sell it for.
• Are connected to small-cap companies: The companies connected to oil penny
  stocks often have a stock valuation that’s under $2 billion.
• Carry a higher risk: This is an extremely speculative trading market. You can
  make excellent returns with oil penny stocks, but it comes with a high risk.

How Can I Make Money Playing Oil Penny Stocks?

As with any kind of trading, it’s important to develop a strategy before you begin. Here are some tips to help you get started trading oil penny stocks and start making money:

• Research the OTC market: Familiarize yourself with the OTC market’s terms and the companies that trade there.
• Develop a strategy: Before you begin trading, identify your goals and investing
  needs. Using this information, you can develop an effective investment
  strategy.
• Prepare to take risks: Oil penny stocks can be fruitful, but they come with a
  risk. When you lose money, consider it a learning experience and keep moving.
• Only invest what you can afford to lose: The only way that recovering after a loss is possible is by remembering that investing carries some risk with it, and not every trade results in a profit. In order to limit the blow of a trade gone wrong, never invest money that you aren’t okay with losing.

Even with their small share prices, oil penny stocks do carry a higher risk than regular penny stocks. But if you’re willing to take the leap, you can see some real profits.