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5 expert tips on how to day trade penny stocks
If you would like to day trade penny stocks, then you have no doubt already clued into the fact that many experts consider this the ONLY way to trade penny stocks. Penny stock day trading can be nerve racking, and not something to be undertaken without a sound base of knowledge into how it is done. So, if you are asking the question: How do I go about day trading penny stocks? You have come to the right page!
Remember, penny stock day trading is not the same as true day-trading, which involves options and derivatives. Profits can be made, though, on a day-to-day basis with penny stocks. This is a result of their high volatility. Day trading enables you to benefit from short term stock price fluctuations. You may, for instance, buy an issue at $0.10 and sell it the next day for 0.l2, which is a 20% profit. After options and derivatives, there is no quicker way to make or lose money in the financial world.
Penny stock day trading tip 1 – This requires a fair number of stocks, as many will not make much of a move from day to day. You need stocks with a daily trading volume of no less than 50,0000 shares, and with a high level of volatility.
Penny stock day trading tip 2 – It takes a lot of time and commitment! You will only benefit from it if you can monitor your holdings through the day. You will need constant access to stock prices, which means that you have to have Internet access during trading hours. You should check the prices 5-10 times a day. Patience is a key – you might sometimes have to go a full week without making a trade, in the wait for the best prices. If you do not have the required patience to do this you should not day trade penny stocks.
Penny stock day trading tip 3 – Taking small gains frequently is a much more effective strategy than taking larger gains less frequently. You will often have the opportunity to make profits of around 20%, and you should take these when you can. In the long term, chances are you will make more money by selling after making a gain of 20%, than waiting for profits of 50% or more, even if sometimes you would have reached this marker.
Penny stock day trading tip 4 – The overall situation in the market, and the fundamentals of a company which you are buying into are not so significant with day trading. All you are looking to do is to buy on the low end of volatility and sell on the high end. Your company might not have a positive future, but that only matters in the long-term – just pick its higher and lower trading range, and make your purchases or sales accordingly.
Penny stock day trading tip 5 – In order to work out what the appropriate buy and sell prices are for you orders, then find a stock that has a large number of bid lots and ask lots. If the spread between the two prices if around 15% or more, then consider putting in a buy order at the bid price, and then if it gets filled you should put in a sell order at the ask price.
So, if you are a budding day trader, take note of these 5 tips, and continue your research! If you are well prepared, then you could do very well out of it.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Penny Stock Trading21 Jan 2011|