Lesson #4:

Successful Penny Stock Trading Strategies

Before delving into successful penny stock trading strategies, it is important to drive home the most important point about being a successful penny stock trader.

You have to accept that trading penny stocks means you will sometimes lose money on stock trades.  The important thing is to have trading parameters in place to cut losses before they become excessive, so that you can maintain your trading account balance for future profitable trading opportunities.  In essence, a successful penny stock trader protects trading capital by cutting losing trades quickly, so money is available to carry out future profitable trades.

To be successful at penny stock trading, it is important to have a system in place to quickly assess a penny stock trading opportunity, so you can make a quick trading decision.  You also have to act with resolve and stick to your trading strategy and parameters.

Wait patiently for a promising penny stock trading opportunity to materialize.  Do not trade with the hope that a penny stock will rise, trade only when there are good reasons to believe there is a near term catalyst to send a penny stock higher and turn a trade into a profitable trade.  It is also very important to strictly adhere to your trading parameters.  If you have decided that a 10% loss is all that you will accept in a trade, then sell when a stock loses 10%, so you have capital available for another trading opportunity rather than hoping that it rebounds.  Do not let your emotions rule how you trade, instead trade using the trading parameters that you set for yourself.  It is better to take a 10% loss and make 50% on your next trade, than to be stuck in a stock that continues to lose money and miss the next trading opportunity.

Before jumping into a penny stock trade, especially a penny stock that is hot and has already made a move higher, step back and assess the situation.  Do not get caught up in penny stock the message board hype.  Message boards can be good sources of penny stock tips and also for company-specific information; however, they are also cesspools of hypesters and bashers.  You need to tune out the banter and ask yourself if a given penny stock has the potential to move higher in the near term, or if it is better to pass on the trade and find a better trading opportunity.

Once you are successfully in a penny stock trade that has risen, it is important to have an exit strategy.  If your trading parameters are to sell when you reach a 30% gain, then take your profit and move on to find the next profitable penny stock trade.  If you would rather hold for larger gains, then consider selling a portion of your shares to cover your initial investment in the trade and hold the rest of the shares as “free shares”.  For example, if you buy a penny stock that quickly doubles (not all that uncommon in the world of penny stocks), sell half of your shares to cover your initial investment, then you can let the remaining shares ride for free and hopefully book more gains.  You can maintain this trade without any risk of loss, since you already covered your initial investment.  The money you free up can be used to initiate another penny trade.

There are numerous penny stock trading strategies, which work for different trading styles and abilities.  Just make sure you find a trading strategy that works for you, and follow through with it with steel determination.

Lesson #2:

Finding Penny Stocks

Lesson #3:

Fundamental Analysis - Performing Due Diligence on Penny Stocks

Lesson #4:

Successful Penny Stock Trading

Lesson #5:

Setting Up a Stock Trading

Lesson #6:

Understanding Level II Quotes

Lesson #7:

Placing a Trade

Lesson #8:

Chart Setups

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