Trading penny stocks is a challenge that many people try to take on because of the financial freedom it can provide. But few end up consistently making money and even fewer make a lot of money. 

This isn’t to say that trading penny stocks is by default a losing proposition. In fact, skilled traders that developed a winning strategy on how to buy and sell penny stocks can find themselves making more money than investment bankers and other hard working financial professionals -- from the comfort of their home.

Should you give trading penny stocks a try? Your chances of success are higher if you possess these skills.

Discipline To Learn

The process of signing up for a broker to trade penny stocks couldn’t be any easier. Fill in a standard form, verify your identity, and fund your account. Total time from start to finish (depending on the speed of your bank) could be a few short hours.

But following this path with no knowledge of trading penny stocks is almost a recipe for failure. Expert stock traders, hedge funds, wealthy investors, and others love to take the opposing side of a trade with a new trader.

New traders with no experience are almost always wrong.

The only way to avoid the most costly mistake is to study, study, study. This is often a difficult proposition for people in their 20s or 30s, or even older. After graduating from college, asking someone to start again from scratch with books, videos, and online quizzes is something most will refuse to do.

The best part of learning something new that many don’t appreciate is it could be fun. There are many entertaining and enthusiastic penny stock educators and even those that charge for their content offer free videos on YouTube.

Patience Is A Virtue

For many penny stock traders, the best trade is ones they don’t enter. After spending months studying anything and everything penny stock trading related, a trader is now trading with real money.

They know how to read the charts and have become experts at technical analysis. They know how to look closely at volume trends to identify clues and patterns that dictate a buying decision.

So why is out of a universe of hundreds upon hundreds of stocks to choose from, a trader could sit idly for hours without pushing a single button on the keyboard? Because they are patient and don't want to lose money.

Impatient traders that developed a strategy based on five elements might be quick to deviate from their plan. They might be eager to enter a less than perfect trade as only four out of the five buying signals were present.

But for a patient trader, this is not the case. A patient trader can go hours if not days without entering a trade they are 100% confident in. Anything less is for amateurs and risk-takers, not professional traders.

So what happens when penny stock traders wait patiently for the ideal and perfect-set up? They maximize their chances of success. Who knows, they might catch an extremely rare 2,000%.

Manage Stress

All stock traders need to be able to clear their mind of all outside distractions, especially stress. The amount of information that a penny stock trader needs to absorb at any one given time is daunting. Numbers are not only flashing across one or more multiple computer monitors, they are changing by the millisecond.

The ability to not let stress get the better part of you can be the difference between breaking even on a trade or losing money on a trade. Think about: a trade quickly moves in the opposite direction with zero advance warning. Within a few short seconds, a stock starts to move hard and fast on heavy volume.

The stressful trader starts to panic and isn’t sure how to proceed. It is hard to blame them as the combination of fear and confusion kicks in and they just don’t know what to do.

The trader that mastered how to handle stress has a built-in mechanism for dealing with this type of scenario. Their ability to remain cool and calm under extreme pressure means they are able to exit the position without even thinking about it. Consider it perhaps an automatic reflex as there is no time for stress in trading penny stocks.

Some of the proven methods in dealing with stress include partaking in a physical activity like working out, keeping track of your feelings in a journal, or simply knowing when to get up and leave the computer.

Ambition

What’s the point of doing anything in life if you aren't willing to put in 100% effort? This is true for trading penny stocks, trading mega-large cap stocks, or even starting a business.

Anyone not willing to dedicate their professional career towards their new task is doomed to fail. Similarly, anyone that isn’t able to dream big and work towards a series of epic goals is wasting their time.

Penny stocks and the stock market in general offer traders the ability to earn millions of dollars. Hundreds of billions of dollars worth of stocks trade hands on a daily basis so simply being content with small ambitions is setting yourself up for disappointment. 

Conclusion: Be Honest To Yourself And About Yourself

Perhaps the most overlooked and most important characteristic required to trade is honesty. You need to be honest to yourself and answer if trading penny stocks is right for you at this point in time.

Maybe you have financial obligations that need to be met so taking on a task with zero guaranteed income isn’t the best idea.

Be honest with yourself and answer if you are just one of the many bored gamblers that were looking for stock market action during COVID-19 shutdowns or if you are willing to put in months of hardships to learn and master a skill that many fail at.

Do you have what it takes to beat the odds?