Penny Stock "Double or Nothing" Investing Strategy

Penny Stocks are a great way to make big money. You find sites while offer you picks on how to get a 500%, 600% or 1000% on Penny Stock picks. However, the big problem is managing risk. With the "Double or Nothing" portfolio, you have a set sell limit while spreading your risk over a universe of 10 Penny Stocks.

How the "Double Or Nothing" strategy works.

The first thing you need to do is find 10 penny stocks (Penny Stocks are defined as stocks which trade under $5 a share). Then you need to make sure these 10 Penny Stocks fall under the following criteria.

• Don't use more than two penny stocks in the same sector
• Use penny stocks that has not made a new low in the past 30 trading days
• Make sure the penny stock is not down because it is facing bankruptcy or because of "cooking the books" or accusations of fraud.

Now that you have found you ten stocks you will do the following.

• Put a sell order when the penny stock doubles in price.
• Then just sit back and relax

It's that simple, let the people who speculate on volatility do the rest. The secret to this portfolio strategy is simple: People who buy penny stocks are looking to get rich over night. They are not looking for a 10%, 20% or even 100% return. They are looking for "Three baggers," "Five baggers" and "Ten baggers."run far too long and then lose out in the end. By setting your sell order at a 100% return, you remove the emotional, "greedy" aspect of investing in Penny Stocks.

So What could go wrong?

In order for this strategy to fail, you would need be an awful penny stock picker and watch over half of your stocks go to zero. However, if you spread out your picks over several sectors, you will avoid having too many eggs in one basket.

What to do with profits

When your penny stocks begin to double and your selling price is hit, take the profit and put it to the side. Then take the initial investment and look for another penny stock.

For example: You buy $1,000 of XYZ Tech stock at $3 a share. The stock doubles. You now have $2,000. You sell XYZ tech. You put $1,000 on the side. Then take the other $1,000 and look for another Penny Stock to put in your "Double Or Nothing" portfolio.

Now, take the profit and put that in a conservative, cash generating dividend ETF like SDY. That is known as the S&P 500 Dividend Aristocrats Portfolio. This ETF tracks the top 50 dividend paying stocks, which has been paying consistent dividends while raising the dividend payments. The SDY ETF slightly underperforms the SPY. But you are getting a 3.65% annual yield. That why your profit is now generating safe cash.

Entering strategy

The best time to start this strategy is when the market is in its seasonal strong period. For U.S. markets that is the period from November 1 to May 1. It is recommended that you do your research over the summer. And then start your portfolio around November 1.

Use Speculative Funds Only

Make sure you do not use more than 10% of your portfolio on this strategy. Since, this strategy can generate money quick, you don't need too much money for this portfolio to work well for you.

Summary

if you want to speculate in Penny Stocks stocks, use the "Double or Nothing" strategy. Make sure to have at least ten stocks in your portfolio. And no more than two penny stocks per sector. Take the profits and put it into a cash generating, dividend paying ETF like the SDY. And make sure you use speculative funds only.