otc Penny Stocks TradingPenny stocks trading, is not as easy as it seems. As we all know, stocks that trade on the OTC Bulletin Board and Pink Sheets are very speculative, volatile, and many of them are very illiquid. However, investors are still lured by the low price of the equities and the potential for massive returns. Is finding one of these penny stock jewels easy ? No. Is it impossible ? The answer is no again. To identify the big winners, you need to monitor news announcements, PR’s, message boards, study charts, volume alerts, and subscribe to different websites. As we have mentioned before, forming a list of stocks is very important, even if you don’t buy 99% of the stocks on that list. Once again, having information and an opinion in advance of the trade is most important.

On the flip side here are a couple of classic no-no’s when it comes to penny stocks trading. The first one is not to buy tips. Many of us, including myself have lost money this way. We all know that guy that we see every so often that always says “Buy XYZ, there new product is unreal”. Then without doing one bit of homework, we buy the stock. Now guess what usually happens ? The results are often pretty scary, because these ideas never seem to work.

csco Penny Stocks TradingThe second common penny stocks trading mistake, is using market orders. This is especially common with new investors. Now remember, most professional investors don’t use market orders even when they are purchasing super liquid stocks like Cisco Systems (CSCO:NYSE) that trade with tight spreads. Now even if they did use a market order on CSCO, the outcome of the execution wouldn’t be all that much different because of the huge volume it trades. However, when buying many penny stocks, the outcome of your execution can be 5 or even 10 percent higher in some cases, only to fall back lower within seconds. The lesson here is pretty simple. Be patient ! If the stock runs away from you, there will be others.

In closing, penny stocks trading is not an exact science, but adapting these tips will hopefully help you find some hidden winners and trade them properly. Also, please check back for more market reports, penny stock alerts and IPO Market News.


Trading Penny Stocks and What You Should Know

penny stock trading 300x228 Penny Stock TradingWe all know that penny stocks are a high risk investment, but they offer some of the richest rewards available on the stock market. Home runs and massive gains are achieved each and every day in the small cap stock arena. You must preserve capital and at some point be willing to cut your losses.


Each and every day, there are several hot penny stocks in play. However, sometimes less is more. First and foremost limit your number of positions to a maximum of three stocks. It’s hard enough to pay attention to one stock, nevertheless five or six.


Investors also need to understand the way the market works. You must understand the difference between the bid and ask. This is especially important with penny stocks. The person who is bidding for the stock is willing to buy the equity at that specific price. The scenario is flipped in regards to the ask price. The person who is offering the stock for sale is willing to sell the equity at that exact price.


Human nature sometimes takes advantage of us and we can get real greedy. When a penny stock is moving, our greed tells us to act quickly.  More often than not, when you place a market order on a hot penny stock your execution price is much higher than you initially expected. This is why it’s better to stay disciplined and miss a potential massive gain than expose yourself to a bad fill and a potential disaster. Another common mistake made while investing in penny stock investors is putting your money with illiquid stocks. Owning a stock that doesn’t trade much before everybody catches on is great when it goes up, but there could be hell to pay if you are wrong. Having no buyers ready to buy your illiquid position can wipe out hard earned gains from other positions. So try to stick to stocks that trade at least 100k in dollar volume per day.


When investing in penny stocks you should have an exit strategy. Actually, it doesn’t matter if it’s a blue chip or a penny stock.  You should always have an exit strategy on any investment.  You need to know how and when to get.  You should set a threshold for how much money you are willing to lose, whether it is 5 or 10%.  If your pre-determined loss threshold is hit, you should chalk it up as a loss and move on.  Another good penny stock idea will come along sooner than you think. Most experienced traders never let their whole position go at once. Scaling out of positions in thirds is a common trading strategy. Scaling out may cost more in commissions, but paying a little more is worth it when implementing a sound strategy.

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