To start buying penny stocks, you should have a sure grasp on essential strategies used by savvy traders and practice these schemes through trading in paper (trading exercise with no money).
Once you realize and appreciate the perils taken in day trading penny stocks, you must master the essential strategies exercised by penny stock traders. You must learn both the penny stock long play as well as the penny stock short play. You should practice these tactics 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 online 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. To understand channeling, just imagine two straight flat lines placed along the jagged line of a line chart; the lower line represents the average low values of the stock and the higher line represents the average high values with the space between representing its channel. After you’re sure you have identified a clean pattern within the stock’s shifting values, an aggressive penny stock investor will continually buy on the low point and sell on the high point.
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. Thus they will be hard to trade away fast, 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 really want to succeed with penny stock trading, after which you must practice plenty of care and skepticism while evaluating information on any single penny stock, particularly if you plan on day trading penny stock.
Yes you can make a ton of money with penny stock trading, but don’t miscalculate how much peril you’ll endure and please don’t engage in trading penny stocks if you cannot practice your due diligence.