Posts Tagged ‘Cheap Stock’
Keys to Becoming an Effective Penny Stock Trader
Written by troy on Tuesday, March 02, 2010 | No Comments
Categories: Penny Stock Trading Tags: Cheap Stock, Penny Stock Traders, Penny Stock Trading, Stock Trader, Trade Penny Stocks
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.
Penny Stocks Buying Selling: Day Trading Penny Stocks is Risky and Profitable
Written by troy on Sunday, April 12, 2009 | 1 Comment
Categories: Uncategorized Tags: Cheap Stock, Microcap Stocks, Smart Investors, Stock Picking Services
Why?
Because when you win, you win big. If you lose, you can lose a whole bunch of money. The speculative nature of penny stocks or microcap trading is well known. Companies that offer cheap stock are not the same companies you’ll find in the blue chip market. On the contrary, they are often very risky investments.
The reason why their stock is so cheap is because they are just starting out in business or they have mismanaged their business and need a quick bail out. Selling inexpensive stock is a way to raise some fast cash for their enterprise.
Determining which small cap stocks are a good buy is very difficult and not for amateur investors. The truth is, most microcap stocks are pure junk. It’s really common for a novice investor to lose money after being lured into buying a cheap stock that is supposed to make them rich.
Very often, these sure deals are nothing but scams that are designed to make the insider stock picking services big money. They count on your lack of experience and knowledge to make them rich.
Only about 5% of the small cap market is truly worth investing in – the rest should be tossed aside like yesterday’s garbage.
The good news is that with the right information and guidance, you can make really great profits in this market. Most smart investors will sign up for a newsletter that specializes in penny stock picks. The reputable newsletters will only analyze the top 5% of companies that they feel are worth putting money on. They will usually recommend three to five good picks. You then decide whether you want to go with their picks or not.
Another reason why it’s a good idea to go with a newsletter is that you can greatly minimize your risk. Wise investing is all about picking more winners than losers and not putting all your eggs into one basket.
Since you probably have a full-time job, you don’t have time to spend pouring over endless data about thousands of companies out there offering cheap stock. You definitely need experts to do this for you, and you also need the tools to make your investment decisions easier.
Many people get into day trading penny stocks for the thrill of making big money in a short amount of time. While this is totally possible, you must also temper your enthusiasm a bit in order to make good decisions based on factual information.
Here’s an example of a typical microcap stock trade:
Let’s say you find a start up company that’s in the software business. They create medical software for hospitals. This sounds like a pretty good business to you so you take a look at their stock offering.
You see that they are selling shares at 50 cents a piece. So, you decide to buy 500 shares for $250. You sit on the stock for a while then you see that it starts to go up. It peaks at $3 per share and you decide to sell. You’ve just made a nice $1,250 profit from that one stock. That’s a 600% rate of return!
This kind of profit is what excites most people about small cap stocks, however, if the opposite should happen and that stock goes down by even inches, you’ll lose all of your initial investment money. This is why you should never invest money that you need to pay your bills and buy food.
Only invest extra money that you can spare. It’s similar to if you were going to Las Vegas for a vacation and you budgeted a certain amount of money to spend on gambling at the casinos. If you lose it, no sweat – it’s fun money anyways.
Day trading penny stocks can be looked at in the same way. It’s fun and profitable when you win, but not so much when you lose. Unfortunately, many investors gamble with money they shouldn’t be risking and lose it all with one or two bad trades. I know this isn’t going to happen to you because you’re going to learn how to invest the smart way, and in this topsy turvy market, that’s the only way you’ll end up being a winner.
By: Star Smith
About the Author:
Unbelievable! A robot that trades penny stocks better than many humans. Find out how you can use Marl the stock trading robot to earn a steady stream of profits.
http://pennystocktradingmadeeasy.blogspot.com