Two Strategies For Day Trading Penny Stocks
To begin buying penny stocks, you should have a sure hold on fundamental strategies used by savvy traders and rehearse those proficiencies in paper trading (practice trading without money).
As you come to an understanding of the financial dangers surrounding penny stocks, you must then master the tactics employed by experienced penny stock traders. The first tactic I will hash out is the long play and the second is called the short play. You should practice these strategies long before you connect a real bank account with a brokerage account.
In penny stock terms, a long play is like investing in a growth stock, but you’re buying that growth stock really early before a whole lot of history or data is available for it. A long play basically means buying a penny stock and then holding it for a long term investment. This can be very profitable if that stock goes from being well below $5 per share to being worth a couple hundred bucks per share in a few years.
Both of these penny stock strategies will be applied in buying penny stocks in general but only short plays will be employed in day trading penny stocks.
Penny stock short plays are more for the bold-hearted day trading penny stock investors. A short play is based on meticulous charting to delineate how a stock is channeling. Channeling means watching for the pattern of high points and low points in a stock’s volatile behavior. Then once you become confident you have determined its pattern, a bold penny stock trader buys at the low side of the channel and sells at the high side.
With penny stocks, this is often very risky for 2 specific reasons: one, penny stocks are highly susceptible to manipulation by fraudsters and two, penny stocks lack liquidity. This means they can be hard to sell, so you buy that penny stock hoping to quickly dump it but then you can’t get rid of all your shares before it drops down in value again.
Please be responsible and reasonable when you evaluate penny stock data obtained on the Web. If you are serious about buying penny stocks, then you need to exercise an extra dose of skepticism and caution when assessing data on a penny stock, especially if you intend to day trade penny stock.
Indeed you can create lots of profit with penny stock trading, but don’t miscalculate how much peril you will endure and please don’t engage in trading penny stocks if you cannot exercise your due diligence.