Ten Rules For Trading Penny Stocks
By Nir Dotan
We all know that there are so many things involved when trading stocks, and for penny stocks investments we need to go that extra mile to do more research about the company, its products, its management, its financials, and the way it is being marketed. That sounds overwhelming, doesn't it? However, it will be easier if you follow these simple rules.
The penny stocks have to make you sit up and notice.
It's called the WOW factor. If the penny stocks do not have it, turn your back and walk away. This WOW factor can be related to a trend, or a partnership with a major corporation, or the like. There has to be good new legitimate news, not just a hype about the company, otherwise it is probably not worth your while.
You decide; don't let others do it for you. Don't listen to what other people say, especially if they are touting supposedly hot or soon to be hot penny stocks. They all have a reason for wanting you to buy the stock. Hey, nothing in this world comes free; everything has a price. Do your research, and make your decision based on your information. Don't let anybody influence you.
Set a stop loss percentage and stick to it. Penny stocks can tank very easily, and there is usually a reason for this happening. Don't hang on to it in the hopes that the price will rise again. Nine out of ten times, it doesn't. Safeguard your investment by setting a stop loss percentage.
Once you reach a certain percentage of loss, unload the penny stocks and get out. You may lose some of your investment money, but that's okay. It happens. Don't dwell on it, and just move on. You'll make money on some other penny stocks, and there are plenty more choices.
Buy and sell your penny stocks on the same day. Many penny stocks exhibit spurts of growth only in a single day. Most of the time, the next day's performance won't be as good. The sooner you sell, the sooner your money will be available for trading again. If you buy on that day, sell it that day too. Usually when you invest, you need a clearing time, maybe about three days, for your money to settle before you can use it again. Don't forego the opportunity of investing in a potential good stock just because your money is still held up.
Never hesitate, and never chase a stock up. The more you take your time, the more you lose. If you know what you are buying and your information is good, there's no reason for you to hesitate. As soon as you decide the stock is good, buy it. And don't take your time deciding. Also, if you set a buy limit order and the stock's price goes up before you can submit your bid, don't chase the stock. If you keep on chasing a stock up and it suddenly tanks, you've lost your chance to make a profit.
Set a realistic profit percent gain. Don't aim too high; get real. If you set a profit percentage that is too high, there is a bigger risk of losing your money. A ten to twenty percent gain may not seem good enough but if you earn ten percent daily, that adds up. Set a realistic goal and don't be greedy.
If you made a mistake, find out why and learn from it.
You will be making many mistakes as you enter the world of penny stocks trading. Learn from them how you made the mistake, why you made it, and how you could have avoided it. If you take the time to study your mistakes and learn how not to make it again, you will be losing less the longer you trade.
Study the market. Watch the market trends, and take time to review the top performing stocks. Check out the ones with the biggest percentage gain and find out why. The more you know about the market, the more you will be able to make informed decisions.
Don't use the money meant for your bills as investment money. What has been set aside for bills payments must stay that way. Don't touch that money just to invest in penny stocks. Save through other means bring your own lunch to work, eat out less, save your lose change, forego that morning Starbucks coffee. You'll sleep better at night knowing that the money you are using wasn't meant for something else.
Create the rules you will follow, and stick to them. Set rules for maximum profit percentage gain, maximum loss percentage, and rules for determining whether a stock is worth investing in or not. Once you make your rules, stick to them. Hasty judgments can cost you your investment.
About the author
Nir Dotan is a writer and promoter of
Penny Stocks
services, and
Penny Stocks Preferred source for the latest news and information on the best and brightest Small Cap Stocks. from http://www.FreeArticlesAndContent.com
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