Blogroll
Two Strategies For Day Trading Penny Stocks
January 26, 2010
Well before you start penny stock trading, you should have a strong hold on essential strategies employed by savvy traders and practice those techniques in paper trading (practice trading without money).
As you arrive at an understanding of the fiscal risks encompassing penny stocks, you must then master the tactics employed by experienced penny stock investors. The first strategy I will talk about is the long play and the second is named the short play. You should exercise these tactics long before you connect a real bank account with a brokerage account.
A long play is just like investing in a growth stock, except you buy penny stock well before a strong history has been established for the stock’s company. A long play basically means buying a penny stock and then holding it for a long term investment. You can really make a ton of money if you hit upon the penny stock of a company with a great product and ton of potential.
Both of these penny stock techniques will be used in trading penny stock in general but only short plays will be applied in day trading penny stocks.
Penny stock short plays are more for the bold-hearted day trading penny stock investors. Short plays involved extensive pattern analysis to determine how a stock channels. Channeling means watching for the pattern of high points and low points in a stock’s volatile behavior. After you’re sure you have identified a clean pattern within the stock’s shifting values, a bold penny stock trader buys at the low side of the channel and sells at the high side.
In penny stock trading, this can be particularly risky for two reasons: one, penny stocks are highly susceptible to manipulation by scammers and because you’ll find low liquidity in penny stocks. This means they can be hard to sell, and end up buying on the low but unable to sell it during the short time it is at its peak.
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.
While it is quite possible to earn ample money with penny stocks, don’t miscalculate how much peril you’ll endure and please do not engage in trading penny stocks if you cannot practice your due diligence.