Penny Stock And Trading Tips

By Michael Cohen

Penny stocks are a tough market to make money in. That's because they are often traded on the otcbb market, with less rules than bigger shares. So it takes some special knowledge to gain the edge that leads to profits.

Let me give you some tips that will greatly improve your chances of profits with penny stock trading.

Be willing and able to lose it all.

Penny stocks trading is dangerous, with prices moving 50-100% or more very quickly in either direction. If you are comfortable seeing your 10 cent share selling for 5 cents a moment later, then you can trade penny stocks. This is why you must be ready to lose it if you trade the penny stocks.

Because most trading markets are very unpredictable, make sure that you use money you can afford to lose. It is too risky to invest money that you badly need very soon for your daily living or for your family. Always calculate the risks involved and what you getting into.

Do not use leverage when trading penny stocks. Leverage lets you play the markets with borrowed money, and if you lose that, you end up not only losing everything, but also owing even more - so never play with penny stocks with margin.

It is better to buy a few more shares once you are into profit, rather than running on borrowed money. Luckily, nearly all brokers now refuse any margin buys with penny stocks.

Understand the market before you trade.

Knowing the market conditions before you buy is a real advantage. It lets you know what might happen unexpectedly, and can lower your risk if done right.

When you have a good picture of the market situation, you can easily lay down a plan for your trading. Things will be easier for you to know what to expect and what to do when you have a good idea about what could happen. This lets you trade with less emotion, just like a real pro.

Set up goals for how long you will be in the trade.

Knowing beforehand how long you will be in the trade will help manage short term fluctuations. If you are day trading, then sudden changes can motivate you to sell, but if you are using buy and hold strategies, short term movements will not cause you to sell suddenly.

Penny stocks are notorious for large, sudden movements, so be sure you know when you want to sell, both for profits, and for losses. That way, you will not miss you chance to cash in when you penny stock makes that sudden temporary movement.

Making big profits in small shares is possible - just like Andrew Carnegie did way back when. It is very risky, but with the right knowledge and rules to trade by, you can greatly improve your chances of good profits.

Make use of all the information you can get, like news reports, directory biographies, product information and competition, as well as technical analysis of the stock price movements, and fundamental analysis of the company. Apply these rules, and you too can profit in penny stocks.

Get a lot richer by discovering these penny stock secrets.
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