Before we get into penny stock trading, lets go over of what trading actually is.
So What is Trading?
Trading is different from investing and is often described as buying and selling shares for a chance of quicker profits in a shorter time period compared to investing.
There are different types of traders from day traders that buy and sell multiple shares of stock within one day and there are also swing traders that may hold positions from a few days to a few weeks.
Unlike investors, traders aren’t often concerned with the fundamentals of a certain company, rather when buying shares they typically look for stocks to trade that are on the move, ready to breakout and seeing huge volume & momentum, and ultimately have the greatest possibility of making them short-term profits.
Traders need to be educated and need alot of experience to be successful. There is typically alot of discipline involved in trading, such as traders putting in stop losses if a stock ends up going against them.
Penny Stock Trading
If you are looking to get into penny stock trading here are a few things you should know.
Many traders will agree that it is better to trade penny stocks than to invest in penny stocks. This is often true as penny stocks are volatile and move fast. Penny stocks are great for trading as they give traders the opportunity to produce gains in a short time frame.
For example penny stocks can see gains of 50% or more in a matter of days or weeks. Traders often take advantage of this by getting in and out of the trade rather than sitting in the stock for months at a time. They then move on and look for the next trading opportunity.
However, as trading may look like something you may want to get into, you should know that penny stock trading can often be risky if you don’t know what you are doing.
If you are looking for some tips on getting started in penny stock trading I offer a free Penny Stock Newsletter that is great for both traders & investors. It is a great resource to help guide you through the world of Penny stocks and I send you information on my latest picks.
My Penny Stock Newsletter offers you top stock alerts, trading & investing tips, and exclusive research that you won’t find for free anywhere else. I also send out tips on how to be a smarter trader & investor, and how to trade penny stocks yourself and finding your own trade setups.
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Also, before beginning trading any stocks you should get educated and do paper trading. Paper trading is basically a simulated trading process in which you can practice trading stocks (buying & selling) with a virtual portfolio of money. Some brokerage accounts offer you the opportunity to do paper trading.
One brokerage that I recommend for penny stock trading is Suretrader
I believe SureTrader offers a really good value, offering a commission for only $4.95 per trade. They also offer a 6-1 intra-day leverage on marginable securities and you don’t have to worry about the Pattern day trader (PDT) rule, which is a rule in the USA that if you buy and sell the same stock or option on the same trading day four or more times within a period of five trading days, you will be considered a pattern day trader.
People that are considered day traders are required to maintain $25,000 equity in their brokerage account at all times. If the account equity falls below $25,000, a day trading minimum equity call will be issued on the account requiring them to deposit additional funds or securities.
So basically with SureTrader you can trade with just $2,000 and not worry about PDT rule that requires you to have 25k in your account to day trade. Besides that they offer great tools for traders and they also offer a free paper trading account, which is great for new traders that want to get some experience and education.
Penny Stock Trading Tips
Below is a few penny stock trading tips that many traders look for. For more tips signup for my weekly newsletter.
Trade Penny Stocks with High Liquidity
In penny stock trading, liquidity can be an issue, some penny stocks are thinly traded and often have low liquidity, making it often difficult to buy or sell shares.
Before getting into a penny stock trade, traders often look to see if the stock is highly liquid, meaning it trades throughout the day with high volume. Without high volume, the spread between the bid and ask price can be so wide that it maybe difficult to buy or sell any shares.
Trade Penny Stocks with High Volatility
Traders often look for stocks that are highly volatile, meaning stocks that have wide daily trading range. Volatile stocks offer better trading opportunities for profits compared to those that trade flat and don’t really move.
Many traders typically look for stocks to trade that are on the move and ready to breakout and seeing huge volume & momentum, and ultimately have the greatest possibility of making them short-term profits.
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