The goal of stock trading is to make money. Unfortunately, the way it is practiced by many you would think just the opposite. If your goal is to make money then you need to give consideration to penny stock trading for the mere fact that penny stock gains can be staggering.
It is humorous that many in the investment community consider themselves successful of they return in the neighborhood of 10% on their account each year. Why is this humorous? Because a 10% gain is a good day for some penny stocks, not a year. Penny stock gains can easily run in the neighborhood of 10%, 20% or even 50% in a day. A five percent move is just an average run of the mill move. Why is this the case? It is because penny stocks have such a low cost per share.
Penny stocks usually refer to any stock trading under $5 per share. Since they are priced so low every move in the stock is magnified. A 20 cent move in a $20 stock is only a 1% move, however, the same move in a $2 stock is a 10% move. Ten thousand dollars invested in the $20 stock would leave you with $10,100 where the same money invested in the penny stock would give you $11,000. If you think that this is a large move, think again. In the world of penny stock trading, penny stock gains of 10% are small. Let’s take a look at a couple of examples.
Dendreon (DNDN) is a biotech stock. On March 9, 2009 DNDN was trading at $2.64. On April 27, 2009 it closed the day at $21.55. That is more than a 900% return in 1 1/2 months. This is the power of penny stock gains. Today the stock trades over $33 per share. This is what can happen when there is great news on a biotech penny stock.
Human Genome Sciences (HGSI) is also a biotech stock. On March 11, 2009 it closed at .48 cents per share. On July 28, 2009 it closed at $14.63. Today it closed at more than $30. That is more than a 6300% return in less than one year. To give you better understanding $10,000 invested in HGSI nearly one year ago would have produced $625,000 today. So when I say that penny stock gains can be staggering, this should give credence to it. You may want to consider doing some penny stock trading of your own.
Posted in Penny Stock Trading.
Tagged with penny stock gains, Penny Stock Trading, penny stocks, stock gains, Stock Trades.
Penny stock trading can be an incredibly lucrative form of trading. However, being a penny stock trader is not as simple as finding a cheap stock and making a trade. If you want to achieve good returns on your account then there are a number of keys to keep in mind.
Trade penny stocks with good volume. There are penny stocks that do not trade many shares on a daily basis. This can cause a problem for the active trader. It makes it more difficult to get into a position or to get out of a position without effecting the price. Since penny stocks are cheaper than the average stock penny stock traders have a tendency to buy more shares. If you are holding 5000 shares of a company that only trades 15,000 shares on an average day, you will move the market against you if you need to exit your position. Try to trade stocks with at least 500,000 average volume. The higher the volume the better.
Stay away from scheduled news events. More often than not the news for penny stocks is not too great. Although there are mammoth gains to be had if you guess in the right direction there are tremendous losses to be incurred if you are wrong. As a result, I would not hold a position going into their earnings announcement. The risk is too great. There are many other opportunities to take advantage of during the time between earnings announcements. The only exception to this may be in the biotech arena. If a penny stock company is waiting on drug approval you may want to take a chance since this can result in an overnight double or more. I have seen stocks open the next day up 700% on such announcements. However, keep in mind that if the announcement is not favorable then the stock is likely to get cut in half or worse.
Another key for the penny stock trader is to buy stocks that have pulled back after good news. Often you are not in a penny stock at the time it makes a big move. But if you will wait you will often get a second chance. If there was a big move then many traders will begin to take profits. This will push the stock lower. As it continues to fall others will want to at least get something out of the big move so they will sell as well. Many times this will bring the stock very near to wear it began the move in the first place. This provides you with a second chance to enter a trade for the next leg up.
If you can put these three keys to work in your daily trading it will go a long way toward making you a more effective penny stock trader.
Posted in Penny Stock Trading.
Tagged with Cheap Stock, Penny Stock Traders, Penny Stock Trading, Stock Trader, Trade Penny Stocks.
If you are looking for a way to give a boost to your trading profits you may want to consider using penny stock trades. Penny stocks have the ability to make large percentage moves. If used in conjunction with your normal trading patterns, penny stocks can help increase the percentage return on your account.
If you do not normally trade penny stocks I would recommend that you take a small portion of your account and dedicate it to penny stock trades. You may want to consider using about 10% of your account for this purpose. As you become more adept at trading penny stocks you can increase the amount you dedicate to this type of trading.
Penny stocks have been know to make 20% – 100% moves with a single trading day. Higher prices stocks that you may be trading do not have the ability to make similar moves. You can look at makying penny stock trades as sort of a diversification for your account. This portion of your account would obviously be the riskier strategy.
Depending on the amount of money that you will be using will determine how many different positions that you may trade at the same time. Never include more than three penny stock positions. There is no need to diversify further since this is ony involving 10% – 15% of your account. In fact, if you wish you can carry only one position at a time.
Since penny stock trading can be volatile and risky at times know your exit strategy for each of you penny stock trades. If your exit strategy has been triggered then exit the stock and wait for a new opportunity to enter another trade.
If used properly, penny stock trades can be used to effectively increase your trading profits.
Posted in Penny Stock Trading.
Tagged with diversification, Exit Strategy, Penny Stock Trades, Penny Stock Trading, penny stocks, percentage return, Profits, stock positions.
