Penny Stocks Standard Strategies for Trading Penny Stocks

The goal of many modern day investors is to find hot penny stocks small capped shares priced cheaply and with the potential for enormous growth. If you look around today’s market you will find many that have skyrocketed, and investors who got in at the right time have made enormous profits on them. The key is timing, and though it is not everything in investing, it is a big part of making money from penny stocks. There are certain strategies one can employ to locate these potentially profitable inexpensive shares, on is to research the marketplace looking for well structured companies with potentially popular products or services, the other is to subscribe to a penny stock newsletter that can alert you to potentially hot penny stocks.

Subscribe to a Penny Stocks Newsletter or Forum

A beginner can become quickly overwhelmed or confused when trying to choose a penny stock into which they might pour their life savings. The potential for loss is a high one, so it is better to accept the guidance of a stock picking service such as Xtremepicks.com, who produces a penny stocks newsletter with a proven track record of selecting profitable penny stocks. You may also wish to join one or two penny stocks forums and interact with other traders. Find out what the buzz is; what stocks other people are talking or even raving about. Once you have a few months experience under your belt, you can begin to apply your own technical analysis to choose penny stocks.

Technical Analysis of Penny Stocks

Technical analysis is basically a form of chart monitoring to look for stocks with the potential to “breakout” or increase in value very quickly. The history of a stock charted price (or even a similar stock that has broken out before) is monitored over a particular period of time the longer the better to establish potential trends or breakout points. Because this is time consuming and tedious research, many traders use a type of software which scans prospective penny stocks. Investors can choose specific criteria for the software to look for such as penny stocks with especially or unusually high trading volumes and other criteria that can identify potentially profitable penny stocks.

Strategize Using Penny Stocks Fundamental Analysis

There are fundamental criteria that can help to identify the hottest penny stocks on the market. These will include the company’s financial status and structure, its assets and liabilities, market share, potential for growth and other aspects of its organization and financial make-up. Once you get the hang of fundamental analysis, you will be able to identify penny stocks that are under valued and thus good investments. Generally a penny stock with a market cap that is a good way below what you have calculated to be a fair valued for the business offering the shares. This can be a long and tedious process, but one that is essential if you want to weed out the winners from the losers. As you become more experienced, you will learn to look deeper into a company’s financial affairs, and consider additional criteria such as demographics, regulations, and even geographical location and meteorological data.

Once You’ve Found Penny Stocks Worth Buying

If on completing the required analysis you find a penny stock worth investing in, you’ll need to determine if the price is right. The secret to successful trading in penny stocks is to keep your cool, and not let your emotions get the better of you. Many novices make the mistake of “chasing” a penny stock increasing their offer time and time again in order to secure the stock. If you miss out on an initial big run, just stay calm and wait for the market to settle. Buying pressure will eventually drop, and accordingly so will the price. It is at that time whether you should consider whether or not the price is still acceptable to you, but this is a better strategy than chasing, which only leads to buying shares at an inflated and false value. Buy low and sell high should always be the basic strategy of any investment.

Selling penny stocks could be a little more complicated. Once you own the shares your money us at risk, and consequently the longer period of time you own them for, the more risk you are exposed to. Obviously you’ll want to sell them at a price at which you’ll make a profit, but that price must also be high enough to cover any commissions. To consistently make money trading penny stocks it is often recommended to take profits almost immediately. Letting a stock run its course in the hope of cashing in at its peak is tempting, but there is a lot to be said for the old saying “a bird in the hand is worth two in the bush.”

There may be times when you catch a penny stock that continues running for a long period. This could enable you to make huge profits, and if you have such an experience congratulations. This is not an easy feat however, and you’ll find that consistent profits of ten to twenty five percent can add up quite rapidly. Likewise you should make use of limit orders when trading penny stocks. Keeping your losses to a maximum of ten percent can make it much easier for you to recoup those losses when you catch the next hot penny stocks.

Happy Trading,

Max Gordon

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Max Gordon has a penny stock newsletter and writes articles on penny stocks, penny stock trading and penny stock picks.  He gives reliable advice on how to make money with penny stocks and where to obtain the very best penny stock pics.