subject: Some Techniques For Penny Stock Trading [print this page] Many people ask for advice on how to go about day trading with penny stocks. Be it a veteran and have been trading on the market for 20 years, or someone looking for a part time opportunity looking to make a full time career out of trading penny stocks. Which ones do I buy? When do I sell? How long do i keep the penny stock? These are often asked.
All of these techniques are centered around the idea that the stock market is made up of peaks and valleys. In dealing with penny stocks, momentum is number one and is strongly based around large changes in volume. By doing your homework, you will learn to recognize a trend in pricing. Identifying breakouts and breakdowns, you will have a better idea of when to get into and out of a stock.
Keep your eye open for huge spiking when the stock opens. This is normally a sign of a stock having a price reversal. On the average, a reversal on price during heavy volume is good when the spike of volume is followed by a trend that is on the downfall on the days, even weeks to come. This is a major sign that a breakout is on the horizon.
After a volume spike, keep your eyes open for pullback. A big thing that get investors frustrated, is losing out on a stock that is moving quick. What many people see, is that there is a pull back on the stock after if first comes out. Most traders will get out to grab a fast gain after the opening run hits a high. The big idea is to look for the bottom of the first pullback.
As a stock reaches day two, do not sell it as it starts to build momentum, Even more important than choosing a time to buy, is the time to sell. On a penny stock that does well the first day, you need to decide on selling now and grabbing a quick profit, or hanging out one more day to see if you can reap the rewards of one more day. This naturally depends on the flow of the penny stock onto the next day. If you continue to hold onto that penny stock in the second day, you will end up looking for another spike in volume and then look for the stock to plateau or decide to sell it off
