How Market Volatility Can Impact Penny Stock Trading (and why it usually doesn’t)

How Market Volatility Can Impact Penny Stock Trading (and why it usually doesn’t)

How Market Volatility Can Impact Penny Stock Trading (and why it usually doesn’t) 1024 546 Steven Dux


While day trading and penny stock trading are driven by patterns and statistics and are usually predictable (if you know what you’re looking for), there are some “situations” that can turn everything upside down. We saw one such event in 2020…

COVID-19 didn’t just impact how we live our lives and spend our days, It impacted the markets in a major way.


It resulted in a paradigm shift in the way the world economy now works.

Closed borders, slowing down of business, industry shutdowns, and lack of employment all had a profound impact on economic activity. Because of this shift, 2020 has been a historical year in the sense that the penny stock market has been impacted like never before. The pandemic–followed by the quest for a vaccine–have collectively impacted the Penny Stocks market in an unusual way, something that doesn’t often happen.  

A medical emergency followed by a medical invention has profound implications on how people live, on how economies work, and how many people gravitate towards penny stocks. As a new trader, who has started dabbling with trading and is gearing up to prepare for future growth, it’s important for you to analyze how these events affect the market (and Penny Stocks in particular).

These changes

…in 2020 transformed the trading environment in a way that nobody could have anticipated.

These kinds of changes can really rattle beginners but if you are prepared, you can take advantage of this situation and give yourself an edge. As COVID-19 could still be with us for some time, there’s a lot of uncertainty going forward. At this time, no one is really sure when the world will return to normal (if ever). As someone who has made money in volatile conditions and even in the unpredictability of 2020, it is my duty to hold your hand through these uncertain times and guide you to success. In the last few years, having made a $5+ million portfolio, I have seen all sorts of market conditions. 

But I could never have imagined anything like what happened in 2020.

Yet despite this, in June 2020 I turned $70,000 into $1.15 million and made over $4 million total in 2020 alone. I understood that there was a shift in the market, that I needed to adapt and readjust, and with this mindset, I was able to have one of my most profitable months ever. You can find profits and success too, as long as you’re prepared and as long as you put in the work. So… How can you too take advantage of market volatility? In today’s article, we will talk about how to navigate this environment and use it to your advantage.  

Penny Stocks involve stocks of companies that have a small market cap and trade at a relatively low price.

Why Penny Stock Trading Is Not usually

…Impacted By Major Market Changes

Investment in Penny Stocks works really well when you have limited funds to invest and can afford to take some risks.

Penny Stocks don’t cost a lot and can give relatively large returns. Penny Stocks usually belong to smaller, newer companies and as such, exist in their own bubble of volatility. As in, while Penny Stocks themselves are highly volatile and therefore give good chances at a return on investment, they don’t get affected by market events, unless something monumental like COVID-19 happens. Usually, the Penny Stock market works off of its own accord without much influence from outside factors such as institutional traders who are using algorithmic trading stations to maneuver through their positions. Because these markets provide a level playing field for all, more wealth doesn’t create more power.

Penny Stock companies only have a limited amount of shares. If someone buys too many, they literally end up buying the company.

Penny Stocks are also considered risky so some people like to go for the safer option of blue-chip stocks, which get impacted by market conditions rather frequently. The fact is that the blue-chip stock market is not a level playing field and belongs to the big players like hedge funds. Penny Stocks have a low entry barrier, meaning almost anyone can enter, and, so long as they know what they’re doing, can double or even triple their investment in just a few months. The biggest benefit of trading Penny Stocks and/or Small Caps is that you can get started with very little money. 

Within months, you could double or triple your money, and within a year you could potentially turn $20,000 into a six-figure trading portfolio.

Because of these numbers, many people gravitate towards trading every year but the number of people who did in 2020 was unprecedented. The pandemic, because it drastically changed the number of players in the market, did impact penny stock trading. According to certain Robinhood statistics, the new accounts on their platform rose from 2 million to 12 million. Such a significant increase led to a rise in trading volume. Most of these newcomers, however, were just following a trend, choosing to trade because of circumstances and ended up facing BIG losses 

There are certain events that drastically change how many traders are playing with Penny Stocks in the market.

Why Penny Stock Trading IS Sometimes

…Impacted By Major Market Changes

Why do some outside events affect how Penny Stocks react? Because of this drastic change, Penny Stocks get affected and react accordingly.

In 2020, due to the pandemic, numerous new traders joined the Penny Stock trading market, many of them not knowing what they were doing. Unemployment and job dissatisfaction reached an all-time high, turning people towards finding new sources of income. According to reports, within the first week of April, 6.6 million Americans filed for unemployment. According to the Bureau of Labor Statistics, the U.S. unemployment rate was 3.8% before the COVID-19 pandemic (February 2020). By May 2020, the unemployment rate may have been as high as 16%.

This rising unemployment rate pushed people to seek other sources of income and day trading seemed to be a popular choice.

With the coronavirus pandemic and stay at home orders, people spent a lot of time home, a considerable amount of time online, and faced growing uncertainty, fear, and doubts about their future. This led to many of them entering the field of trading. Another factor that led many people to trade is that by staying home to work and by many places in the United States being shut down, it turned many curious minds to look into what the stock market is doing. During this time, I’ve seen a quantum leap in trading volume in the stock market.  

Volumes of orders have increased by two to three times, indicating that many people are looking for a way to earn some extra income.

Not all of them did the work to gain knowledge and skills, though. Many of these new traders are inexperienced, and over 90% of them are destined to fail unless they learn the psychology and science behind the market. Locked down in their homes all day, stuck to their phones, many people have found information on day trading and how it can be lucrative, but owing to so much misinformation out there, they didn’t really do their research. It led to some large failures, but failure for those unwilling to put in the hard work can be a huge advantage to those who are. 

As we just discussed, most of the time Penny Stocks do not get affected by outside events. But once in a while, something comes along that does affect Penny Stocks.

How To Adapt When Big Changes Hit

Penny Stock Trading

Going forward, there will not be many such events but just as we should have been prepared for the changes brought on by the pandemic, we need to be prepared for the future…

In 2020, it was the pandemic. There have been indications that the vaccination process once completed will also impact the penny stock market. Vaccine related stocks have spiked in the last few months, and this trend is likely to continue. There’s light at the end of the tunnel after the pandemic and it will likely have an effect on Penny stocks, as people return to work and their “previous” lives. This may lead to a reduction in the number of beginners, and people leaving the markets that realized trading just wasn’t for them. After all, trading isn’t a walk in the park and does require commitment and hard work which gives YOU an advantage because if you put in the work and know what you’re doing, you can take advantage of any situation that impacts the market. Here are a few things to keep in mind to adapt when big changes hit penny stock trading:

Rely On Your Knowledge & Skills

Stay confident in your abilities no matter how the market gets affected. Spend your quarantined time at home to read through my Investing For Beginners articles, subscribe to my YouTube Channel, and sign up to my Free Day Trading 101 Newsletter where I guide you through the steps you should (and should not) take. 

Manage Your Emotions

Managing your emotions while trading becomes even more significant when market shifts happen. If you allow it, your emotions can become overrun with fear and uncertainty. Or, as the case may be… excitement. None of this should affect how you trade. EVER! You have your knowledge to rely on. You have data to rely on. Therefore you must stay focused and logical, and keep your emotions at bay. 

Listen To Your Mentor’s Guidance

If you do not have a mentor yet, get one today. A mentor gives you the correct training to get started and get set up for success. Most significantly, a mentor guides you in developing your knowledge and skills so you can make your own techniques and patterns. The quicker you do this, the quicker day trading can become your primary source of income. 

When significant market changes happen, it is important to listen to the guidance of someone more experienced than you.

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    If you’re new to all of this and have limited knowledge as to how the stock market works, I highly recommend you invest in The Freedom Challenge.