Defining a Penny Stocks Trader

While many people have success at it, a penny stocks trader is a rare breed. Most people get involved in the penny stock arena for one reason, to hit a home run. Regardless if it’s an AMEX stock or a Pink sheet stock, investors are looking for huge returns when they buy such speculative issues.

However, there are some experienced traders who constantly profit on smaller moves in penny stocks. The penny stocks trader that I am talking about, takes numerous small profits and keeps his losses small. Although, while this is not an easy skill to acquire, making money on short term trades with low priced stocks can be acquired through hard work, research, discipline and lastly, trial and error.

Keeping losses small is the most important aspect in penny stocks trading. This is easier said than done, and is especially difficult considering the lack of liquidity and volatility in some penny stocks. For instance, in the sub penny stock market, many traders get filled on the bid and immediately place an order on the ask, which is often 50 to 100 percent higher. If they get filled by the next buyer it’s a grand slam, but what do they do if they are still in the position when it goes against them ? It’s pretty simple, the good ones sell at a loss and move on to the next trade.

Please remember, there are traders of all exchanges who go long weak stocks and go short strong stocks all the time and make livings. The key is not the stock, it’s the discipline and trading strategy. The point is to develop one quickly, but make sure it’s an intelligent plan that has a favorable risk/reward ratio and stick to it.

Make sure you start extremely small if you attempt to trade these speculative issues for the first time. Develop your plan based on a small dollar amount and don’t commit more than 20% of your allocated funds to any one particular idea. This way, if you happen to catch a clunker, you won’t get wiped out. The key in investing and life to some degree is preservation.

Stay tuned for more information, regardless if you are a penny stocks trader or are somebody who is looking for or market reportsIPO market news updates. They key is staying informed.