Investing in penny stocks is said to be one of the riskiest types of investments. So much so, in fact, that it is seen as akin to gambling. Be that as it may, you can win big with this kind of stocks. And this is also why there are now so many strategies, tools, and techniques that all promise to mitigate some of the risk. The simple fact is that penny stocks are dangerous. Unless you can accept the fact that you may lose everything that you have invested, you shouldn’t even look at them. On the other hand, if you are comfortable with that, then you should choose a strategy and stick with it, at least until you know whether it pays off for you or not. So what are some of those strategies?

1. Go to Major Stock Exchanges to Find Cheap Stocks

A penny stock is always traded at less than $5. This means that you can find them on AMEX, NASDAQ, or NYSE, although they will be closer to the $5 mark. If you want really cheap stocks, then you will have to look elsewhere. The benefit of trading on the major exchanges is that the risk is a lot lower. That said, you do need to investigate each stock to find out why its price is so low. If its price currently declining rapidly, then the company may be in trouble. And it is likely that it will take a long time for the stock to recover.

2. Pink Sheets and Over the Counter (OTC) Markets

On pink sheets and OTC markets, you will find those companies that once ruled the roost but have lost a lot of money. They are comparable to startup companies. In fact, many are startups and around 95% of them will not make it. Nevertheless, you can find stocks priced at less than $1 here. You need to be realistic about the fact that the majority are junk stock and won’t get you anywhere, but if you strike it lucky and find one in that 5%, then you can make it big.

3. Pump and Dump Stocks

Pump and dump stocks are the most dangerous of all. In fact, such stocks are the reason why penny stocks have such a bad name. Sometimes, these tactics are even completely illegal, particularly if a pink sheet stock is purchased, heavily promoted, and then sold in full, when in actual fact, there isn’t a solid business to support that stock at all. However, not every pump and dump scheme is illegal and if you feel that you have spotted one that is real, you could make it really big. You need to get hold of your stock as it rises, and get rid of it at the exact right moment. You may have heard of Timothy Sykes, who turned $12,000 into $3 million in just a few years. This is how he was able to do it. But he does have a knack for technical analysis, which is what you need to be successful in this.