To buy penny stocks or not to buy penny stocks. That is the question. OK, it is not exactly Hamlet but it is a question that many traders ask themselves at some point in their trading life. If you are not a trader then I can answer the question for you rather simply. I would avoid penny stocks is you are a buy and hold investor. Maybe the only exception that I would make would be companies like Citigroup that find itself in the land of penny stock status. If you believe they have the ability to return to their former glory then you should consider buying penny stocks.
However, the question of whether to buy penny stocks (or to sell penny stocks for that matter) is really one for an active trader. Penny stocks don’t present you with the greatest of fundamentals so of necessity they are more trading vehicles. Make your profit and get out and visit them sometime again in the future when they look attractive for a short term gain.
I am going to make a case to buy penny stocks. There are many reasons that cause me to come to this conclusion, however, for the sake of brevity I would like to focus on just three. Let’s dive in.
Penny stocks are volatile. If you are a trader you know that you need stocks to trade that are volatile. It will not do you much good to spend your time trying to trade some $50 company that moves in a range of 15 cents each day. Stability may be great for long term holds but it won’t help you out if you are a trader. Why are penny stocks so volatile? Simply because the slightest news can be something very beneficial or negative for the company. Most penny stocks are in a make or break mode. You can use this in your favor.
Penny stocks are cheap. Cheap penny stocks help the active trader in the sense that he/she can buy many shares of a company rather than a few hundred. Let’s look at a little example. If you were to buy 200 shares of a $50 stock, it would cost you $10,000. This same $10,000 could be used to buy 5000 shares of a $2 stock. Now if each company would move 20 cents you would make $40 on the higher priced stock and you would make $1000 on the penny stock. That is not a bad chunk of money. That is the power of penny stocks.
The final reason is that penny stocks can make large swings in very short period of time. This is due in part to their volatility. The swings that penny stocks can make are massive on a percentage gain basis. It is quite common for penny stocks to move 10% in a given day. That is something that you cannot get out of higher priced stocks. In other words, penny stocks give you great bang for your buck. So if you are contemplating where or not to buy penny stocks I would suggest that you give them a try. Just learn to be a disciplined investor. You can find other articles on this website that will give you pointers on how to do this.
Posted in Penny Stock Investing, Penny Stock Trading.
Tagged with buying penny stocks, cheap penny stocks, penny stock, penny stocks, To buy penny stocks.
A number of years ago back during the stock market craze of the late 1990’s and early 2000s day trading experienced quite an explosion. Day trading centers opened up all across the United States where traders gathered to try to find their fortunes. Unfortunately, many of these traders lost a lot of money if not all of their trading fund. It is not that day trading could not be done successfully; it can. However, most people do not have the discipline to pull it off. Today it is difficult to effectively day trade since the volatility is not as great as it was 10 – 15 years ago. However, if you are intent of day trading then I would investigate penny stock day trading.
Penny stock day trading can still be done because penny stocks still retain the volatility necessary to make it work. Day trading cannot be done in the absence of volatility. Therefore penny stocks are the perfect stocks for this type of trading. Penny stocks are able to make pretty big swings each and every day. It is not uncommon for them to swing 5% – 10% each day. It is also quite possible for them to swing as much as 20% – 50%. There are also penny stocks that have made more than 100% percent gains in a day.
The difficult thing when penny stock day trading is obviously picking the spot to enter the stock during the trading day. Often, the moves in penny stock trading occur at the beginning of the trading day. If you are intent on day trading then I would look for stocks that open up big or down big and then look for some sort of reversal bar or some indication that the stock may continue.
Either way you need to keep your stops close and be willing to take quick profits. I would not look for anything greater than 5% for the most part. You will on occasion make larger percentage profits but always looking for these profits may end up costing you money in the long run.
If the stock opens up or down big often there is a pullback or a rally in response to the initial move. This may provide you an entry point if the stock is going to continue to move in the initial direction of the open. If you enter the trade and it moves beyond the open I would probably place some sore of mental stop at the open. If it fails to hold this level there is a good chance for a reversal. I would then look to enter the trade in the other direction.
Penny stock day trading is difficult to do correctly. I believe it is much safer to do penny stock swing trading. But if you are intent on this type of trading then hopefully these ideas will be of help to you.
Posted in Day Trading, Penny Stock Trading.
Tagged with Day Trading, day trading centers, penny stock day trading, penny stock swing trading, Penny Stock Trading, penny stocks, quick profits.
Penny stocks to watch is a term that is often searched for on the internet. It may have even brought you here. Before you move on listen to what I have to say. You need to be careful who you are listening to. Often the sites that you will land on will be a site that is paid to pump certain stocks. What they don’t tell you is that their list of penny stocks to watch is not based on any research that they have done but rather what they have been paid to push. You must ask yourself if you really want to invest in these types of stocks.
Other sites aren’t necessarily paid to pump penny stocks but they have a large readership with a newsletter. They stake positions in penny stock and then they put out an alert to their newsletter readers. A large number of people buy blindly and the owner of the newsletter takes profit and his readers are left holding the bag as the stock sinks back to where it came from since the buying frenzy is over.
If you want to be successful in penny stock trading then you need to learn how to trade penny stocks. You need to have a penny stock trading strategy and learn about entry and exit strategies. If this is not something that you are familiar with then you can learn about penny stock trading at the Penny Stock Digest. The site is not complete but the information there is quality and free. Check it out. At some point the site will be complete and it will serve as a manual on penny stock trading, one that you would expect to pay quite a bit of money for.
The profit potential in penny stock trading is enormous but don’t go around chasing penny stocks to watch. Learn how to trade penny stocks and you will have a skill that can be used to make money rather than depending on someone else. Who knows maybe someone will come to you in the future looking for hot penny stocks.
Posted in Penny Stock Articles, Penny Stock Investing, Penny Stock Trading.
Tagged with hot penny stocks, learn how to trade penny stocks, penny stock, penny stock digest, Penny Stock Trading, penny stocks to watch.
