Posts Tagged ‘Penny Stock Traders’
Penny Stock Investing Tips
Written by troy on Wednesday, March 03, 2010 | No Comments
Categories: Penny Stock Investing, Penny Stock Strategy, Penny Stock Trading Rules Tags: Penny Stock Investing, Penny Stock Traders, Penny Stock Trading, penny stocks, Trade Stocks
If you want to be successful in investing then you need to live by a set of rules. Penny stock investing is no different. In fact, because of the volatility of penny stocks it is probably even more important to trade by some very specific rules. With that in mind here are a few penny stock investing tips to help in your stock trading.
Tip #1
Always trade stocks with good volume. This is especially true in the penny stock trading world. Since most penny stock traders trade thousands of shares it is important to trade in stocks that have a high enough daily volume to be able to absorb you moving in or out of a position. In thinly traded stocks you could move the stock price by up to 5% against you if you had to get out. Low volume will work against you.
Tip #2
Don’t follow too many penny stocks. One of the mistakes of traders is that their attention is too divided. You do not need to follow 50 or 100 or 200 stocks to be successful in penny stock investing. In fact I would say failure is proportionate to the amount of stocks you are trying to follow. I would recommend putting together a watch list of 10 or 20 companies and look at their charts every day. If you try to track too many stocks you will miss big moves when they occur. Following a smaller watch list allows you to get to know your stocks. You are aware of earnings dates and some fundamentals. You begin to get a feel for its trading pattern.
Tip #3
Don’t be too diversified. The point of trading penny stocks is to be able to take advantage of the large swings. If you are too diversified (i.e. holding too many positions) you will water down your profit potential. I would recommend not holding more than 3 or 4 positions. Does this create more risk? Of course it does. But you need to manage risk by your trading rules and not through diversification.
Tip #4
Have specific trading rules in place. As I mentioned earlier no one will succeed in penny stock investing apart from a disciplined set of trading rules. Before you begin trading you need to have a defined set of entry strategies and exit strategies. then you must stick to them like glue. These rules are your lifeline in trading. Without them you will go under.
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.