Free Trading Lesson – $20 and under stocks for beginners
First, this is a bit of a bait and switch title. When it comes to stock trading, beginners really have no price point they should be trading. $5.00 stocks, $20.00 stocks, $100.00 or even $500.00 stocks. As for new traders, and many with limited budgets, it’s only natural to flock to stocks that look “affordable” but that, in my opinion is the wrong place to start (and it took me a while to learn this the hard way)!
If you saw this list of stocks, but didn’t know the price, would they look like they had potential to offer good returns?
Here we have a daily snapshot of the highest percentage moves in the market today, in US Stocks, with a volume greater than 600,000 shares traded. They all increased in price anywhere from 5.85% to 14.42% in ONE day!
If you are new to trading, and as an example, you have $5,000 saved up to invest. It’s only natural to look at a $20.00 stock and think “With $5,000 I could buy 250 shares of that stock! If it doubled, I could easily double my money to $10,000!”
It’s logical. It makes common sense. It’s a lot easier for a lower priced stock to double than a higher priced stock. However, looking for stocks that double is very, very, tricky, and usually it takes a good amount of time waiting to see if your hunch is right.
If you want to grow your capital quickly, you need a good percentage return on every trade, and those trades need to pay off quickly so they can compound your capital.
What’s most important isn’t a stocks price, but it’s percentage move!
Think about it, if a $100 stock moves 5% you make the SAME amount of money if a $20 stock moved 5%. When it comes down to it, cheaper stocks don’t move that much more (on a percentage basis) than expensive stocks.
$5,000 buys 50 shares of $100 stock
$100 stock increases 5% = $5.00 / share
50 shares x $5 = $250 profit
$5,000 buys 250 shares of $20 stock
$20 stock increases 5% = $1.00 / share
250 share x $1.00 = $250 profit
So the goal is to identify stocks that MOVE, not stocks that are within your “budget”. If you could find a stock that can move 5-10% on a daily basis, it would take 10-20 days to DOUBLE your investment. ** Now, you won’t find something that moves up that many days in a row, but you get the idea. **
Now let’s look at those same stocks, but this time actual prices are included:
Personally, I’ve taken it a step further. I trade across 12 unique markets and I watch the same symbols every day. They all vary in price, but they give me anywhere from 2% – 20% price movement daily to play with. So if you’re investing $5,000 or $100,000, it’s all about the percentage move, and not the price!
Want to learn more? Download my free e-book on the B12 Trader today and see how I’ve simplified this approach to make 5-15% returns per month.
– The B12 Trader