A 10-Point Plan for Exchange (Without Being Overwhelmed)

Six Basics of Penny Stock Trading

Penny stocks, also referred to in some countries as cent stocks, are common shares of small companies trading at low prices a share. There are many such companies today, but for you to be successful, have a penny stock investing plan that begins with following the most basic rules for every penny stock trader to keep in mind.

1. Use limit orders at all times.

Because of their nature, penny stocks very thinly traded. Thus, the deviation between the bid and the ask is often substantial. When investors use market orders, they can be tricked by market makers who want to make some fast money. To keep the market maker from buying or selling at any price, limit orders must be used. This means your terms, not the market makers’ terms, will be used when you buy or sell penny stocks.

2. Trade within regular hours.

An absence of volume can lead to after-hour trades that are illogical and most definitely do not represent a good match of buyer and seller. Even a few pennies can make a tremendous difference when it comes to penny stocks. Sticking to regular trading hours allows you to elicit the most efficient trade.

3. Avoid chasing performance.

For some reason, investors can decide to buy only if a stock goes higher. As a stock soars, these folks believe that it’s safe for them to make a move. They’re wrong. In most cases, by the time they decide it’s safe, the opportunity is no longer there and losses have replaced them. What’s safe is when you keep to new recommendations and the buy limits that accompany them.

4. Keep your holdings to 20 to 30 positions.

This is a golden tip. If you want to get maximum gains, maintain a 20 to 30-position portfolio. Returns will be diluted if you get more than that. Less than that and performance lags considerably. Worse, buying too few stocks means you’re at risk for large losses.

5. Trade for a reason.

Owning a stock that already has shot up in value is acceptable, as long as you have good reason to do so. “You can call these reasons “triggers. If a stock has no trigger, it will never take off.

6. Expect a holding period of 90 days at average.

Lastly, penny stocks can be very volatile, going up or down quite fast. Expect big gains up to a maximum of 90 days. If that move does not happen, take the next opportunity. Sometimes, you’ll have to go back and forth with a single stock due to its volatile nature. You won’t see any rapid-fire day trading, but if you foresee a stock’s value going down and vice-versa, the best thing to do is to sell it.

Finding Ways To Keep Up With Trading

Valuable Lessons I’ve Learned About Stocks