When To Sell Penny Stocks

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Penny Stocks can be a very effective way to provide you with a secondary income. They can be used to create passive income because they do not require you to be constantly watching over them. The problem that most people have when it comes to stocks is – not knowing the right time to sell.

Penny Stocks can rise very quickly but they can also fall quickly too. The reason that most investors hold onto a stock is because the fail to separate their emotions from their actions…

Penny Stocks, Investments

Penny Stocks can be a very effective way to provide you with a secondary income. They can be used to create passive income because they do not require you to be constantly watching over them. The problem that most people have when it comes to stocks is – not knowing the right time to sell.

Penny Stocks can rise very quickly but they can also fall quickly too. The reason that most investors hold onto a stock is because the fail to separate their emotions from their actions.

All of your penny stocks buying and selling should, of course, be based on sound research both of the market and the companies?recent history. How the company is doing in terms of profitability, whether they are just about to, or have just announced profits, losses or new patents, discoveries and products, can all affect your decision on whether, or not, to buy.

Knowing the right time to sell your penny stocks however can sometimes seem, as much an art as a science, although getting it wrong can be fatal. Many people seem to put all their research efforts into knowing what penny stocks to buy and when to buy them.

Investors seem to forget about researching to sell stocks. Instead, they let their emotions take control and sell at the wrong time. Investors selling at the “wrong time?fall into two categories. These categories are, The Runners and The Sitters.

The Runners like to take profit way too early. They see their Penny Stocks rise a little and sell because they don’t want to “risk too much? I’ve seen it time and time again; these people set out to earn a 25% Return on Investment and end up taking profit at 1%. Someone who takes profit twice at 25% earns a lot more than someone who takes profit twice at 1%. Usually, as soon as they sell a penny stock, it will rise even further and they’ll be wondering why they sold so early.

The Sitters are the heavily emotionally involved in their penny stocks. They are gamblers at heart and just do not want to let go of a losing position because “it could bounce back any day now? When they do let go of their Penny Stocks – there is virtually nothing left. The sitters like to sit on a losing position. They like buying but dislike selling.

Do you want to be a Runner or a Sitter? Well, I hope you are neither. You want to be a winner. A winner will separate their emotions from their investment thinking and will also research when buying and also when selling. They will buy and they are not afraid of selling.

There is great deal of profit to be made from trading in Penny Stocks. But you have to know not only what to buy but also how long to keep it and when the best time to sell. The answer, as with most things in the world of finance, is good information and research. But that doesn’t end when you buy. Find out why your penny stocks are rising and this will put you in a much better position to know when to sell.

Stock Option Trading Millionaire Principles

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INTRODUCTION

Having been trading stocks and options in the capital markets professionally over the years, I have seen many ups and downs.

I have seen paupers become millionaires overnight?
And

I have seen millionaires become paupers overnight?
One story told to me by my mentor is still etched in my mind:

“Once, there were two Wall Street stock market multi-millionaires. Both were extremely successful and decided to share their insights with others by selling…

option trading, stock option trading, options, stocks, shares, finance, investment

INTRODUCTION

Having been trading stocks and options in the capital markets professionally over the years, I have seen many ups and downs.

I have seen paupers become millionaires overnight?
And

I have seen millionaires become paupers overnight?
One story told to me by my mentor is still etched in my mind:

“Once, there were two Wall Street stock market multi-millionaires. Both were extremely successful and decided to share their insights with others by selling their stock market forecasts in newsletters. Each charged US$10,000 for their opinions. One trader was so curious to know their views that he spent all of his $20,000 savings to buy both their opinions. His friends were naturally excited about what the two masters had to say about the stock market‘s direction. When they asked their friend, he was fuming mad. Confused, they asked their friend about his anger. He said, ‘One said BULLISH and the other said BEARISH!?

The point of this illustration is that it was the trader who was wrong. In today’s stock and option market, people can have different opinions of future market direction and still profit. The differences lay in the stock picking or options strategy and in the mental attitude and discipline one uses in implementing that strategy.

I share here the basic stock and option trading principles I follow. By holding these principles firmly in your mind, they will guide you consistently to profitability. These principles will help you decrease your risk and allow you to assess both what you are doing right and what you may be doing wrong.

You may have read ideas similar to these before. I and others use them because they work. And if you memorize and reflect on these principles, your mind can use them to guide you in your stock and options trading.

PRINCIPLE 1

SIMPLICITY IS MASTERY

When you feel that the stock and options trading method that you are following is too complex even for simple understanding, it is probably not the best.

In all aspects of successful stock and options trading, the simplest approaches often emerge victorious. In the heat of a trade, it is easy for our brains to become emotionally overloaded. If we have a complex strategy, we cannot keep up with the action. Simpler is better.

PRINCIPLE 2

NOBODY IS OBJECTIVE ENOUGH

If you feel that you have absolute control over your emotions and can be objective in the heat of a stock or options trade, you are either a dangerous species or you are an inexperienced trader.

No trader can be absolutely objective, especially when market action is unusual or wildly erratic. Just like the perfect storm can still shake the nerves of the most seasoned sailors, the perfect stock market storm can still unnerve and sink a trader very quickly. Therefore, one must endeavor to automate as many critical aspects of your strategy as possible, especially your profit-taking and stop-loss points.

PRINCIPLE 3

HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES

This is the most important principle.

Most stock and options traders do the opposite?
They hold on to their losses way too long and watch their equity sink and sink and sink, or they get out of their gains too soon only to see the price go up and up and up. Over time, their gains never cover their losses.

This principle takes time to master properly. Reflect upon this principle and review your past stock and options trades. If you have been undisciplined, you will see its truth.

PRINCIPLE 4

BE AFRAID TO LOSE MONEY

Are you like most beginners who can’t wait to jump right into the stock and options market with your money hoping to trade as soon as possible?

On this point, I have found that most unprincipled traders are more afraid of missing out on “the next big trade?than they are afraid of losing money! The key here is STICK TO YOUR STRATEGY! Take stock and options trades when your strategy signals to do so and avoid taking trades when the conditions are not met. Exit trades when your strategy says to do so and leave them alone when the exit conditions are not in place.

The point here is to be afraid to throw away your money because you traded needlessly and without following your stock and options strategy.

PRINCIPLE 5

YOUR NEXT TRADE COULD BE A LOSING TRADE

Do you absolutely believe that your next stock or options trade is going to be such a big winner that you break your own money management rules and put in everything you have? Do you remember what usually happens after that? It isn’t pretty, is it?

No matter how confident you may be when entering a trade, the stock and options market has a way of doing the unexpected. Therefore, always stick to your portfolio management system. Do not compound your anticipated wins because you may end up compounding your very real losses.

PRINCIPLE 6

GAUGE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY

You know by now how different paper trading and real stock and options trading is, don’t you?

In the very same way, after you get used to trading real money consistently, you find it extremely different when you increase your capital by ten fold, don’t you?

What, then, is the difference? The difference is in the emotional burden that comes with the possibility of losing more and more real money. This happens when you cross from paper trading to real trading and also when you increase your capital after some successes.

After a while, most traders realize their maximum capacity in both dollars and emotion. Are you comfortable trading up to a few thousand or tens of thousands or hundreds of thousands? Know your capacity before committing the funds.

PRINCIPLE 7

YOU ARE A NOVICE AT EVERY TRADE

Ever felt like an expert after a few wins and then lose a lot on the next stock or options trade?

Overconfidence and the false sense of invincibility based on past wins is a recipe for disaster. All professionals respect their next trade and go through all the proper steps of their stock or options strategy before entry. Treat every trade as the first trade you have ever made in your life. Never deviate from your stock or options strategy. Never.

PRINCIPLE 8

YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE

Ever followed a successful stock or options strategy only to fail badly?

You are the one who determines whether a strategy succeeds or fails. Your personality and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki says, “The investor is the asset or the liability, not the investment.?
Understanding yourself first will lead to eventual success.

PRINCIPLE 9

CONSISTENCY

Have you ever changed your mind about how to implement a strategy? When you make changes day after day, you end up catching nothing but the wind.

Stock market fluctuations have more variables than can be mathematically formulated. By following a proven strategy, we are assured that someone successful has stacked the odds in our favour. When you review both winning and losing trades, determine whether the entry, management, and exit met every criteria in the strategy and whether you have followed it precisely before changing anything.

In conclusion?
I hope these simple guidelines that have led my ship out of the harshest of seas and into the best harvests of my life will guide you too. Good Luck.

Stocks And Shares – How To Trade Profitably In A Bear Market

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Many traders find they can make money trading in bullish markets, but when there is a major correction underway or when the market has turned bearish, they literally freeze and are unable to trade successfully or find profits in their trading. Discover how you can trade profitably in a bear market and not be slaughtered.

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Trading in a bull market is easier than trading in a bear market. Many traders find they can make money trading in bullish markets, but when there is a major correction underway or when the market is bearish, they literally freeze and are unable to trade successfully or find profits in their trading.

First,when a market has collapsed, it is important to accept the fact that the market trend has changed from bullish to bearish. It is human nature to find scapegoats or to find a “reason?or to rationalise away the fact that the market trend has changed. But unless the trader accepts the fact that he is solely responsible to trade his way out of a bearish market, he will find his position untenable and discover losses that add up daily as the market bearish sentiments continue. It does not pay to refuse the responsibility of your own trading action and put the blame on your broker or your friend who has given you the “tips” that led to your losses.

If you are faced with losses from a sudden collapse in prices, accept that it is your responsibility to now institute action to get out of this situation with profits.

Secondly, while in bullish markets it is easy to trade by just buying stocks that are in initial outbreaks and just holding them and coming back again after a few days to reap profits, you cannot do the same during bearish markets.

In bullish markets, you trade with the trend, and as long as the trend is up, you stand to make easy profits. On the contrary, in bearish markets, the market goes into consolidation, and trends are “shorter?in duration or the market will go into a sideways direction, with prices oscillating between ranges. During bearish markets, we are more biased towards range trading rather than trend trading. So if you do not know how to change from using trend trading to range trading, you can be caught with short term trend changes and suffer whipsaws and lose money trend trading during bearish markets.

Dealing with traders who have gone through a series of major market corrections since 1987 has led me to conclude that there is no room for lackadaisical trading during bearish markets. The margin of error for a trading signal is much lower when trading in a bearish market. I have seen traders who are able to quickly change or adapt from longer trend trading to trading shorter swings in the market or range trading to be able to make money from their trades. In bearish markets, they are contented with smaller profits, but trading more often and in higher volumes. To aid in their margin of profits, they are able to negotiate the lowest brokerage terms possible with their brokers or to use discounted online trading platforms.

In bearish markets, the trader who range trade will be the one who is best positioned to take advantage of the shorter and faster rebounds that occur as stocks get oversold and retrace upwards. Accepting personal responsibility and adapting to range trading will improve his chances to make money during bearish markets.

Stock Breakouts And Resistance

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Breakouts through resistance are the most desirable of all trade opportunities. (This discussion will be the buy opportunity discussion of breakouts. (An equal sell opportunity exists on breakdowns through support). A breakout is a penetration of resistance based on a pricing established over time with price reversals taken place at approximately the same price point in previous time periods.

Sounds easy. Well it sure sounded easy when that guy in the $1000 seminar told me…

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Breakouts through resistance are the most desirable of all trade opportunities. (This discussion will be the buy opportunity discussion of breakouts. (An equal sell opportunity exists on breakdowns through support). A breakout is a penetration of resistance based on a pricing established over time with price reversals taken place at approximately the same price point in previous time periods.

Sounds easy. Well it sure sounded easy when that guy in the $1000 seminar told me about it. I also read how easy it was in the $90 book on trading that said would make me a wealthy independent trader.

Breakouts are wonderful if they continue. If they fail you can expect the pricing not to trend but to return to a range bound probably touching the lower pricing before it rises again. That price movement is probably beyond your stop loss and you will not be pleased.

This occurs more often than you want to believe. Since so many other people see the breakout they are as nervous about it as you are and you have a larger number of quick exits with the slightest wiggle. This is referred to as “buyers remorse?or a “bull trap? What this really represents is a serious hit against your P&L.

Remember, breakouts are a product of an established range bound market. The continuation of the sideways market is the rule with a move away from support or resistance back into the trading range. That means a failed breakout is the rule. The breakout is the exception. Some traders believe the reverse is true. That can cost you a bundle of cash in trading losses.

In addition, MACD Plays: When you are considering any stock you need to know if that stock is exhibiting a tendency to trend. If you wish to be more successful in your trades, then you should be able to identify those stocks with this tendency. Logic dictates that you will make more profits in trending stocks rather than in those issues that fluctuate up and down.

Trading Using Multiple Time Frames

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Why do we need to Trade Using Multiple Timeframes?
To improve the efficiency of our trading strategy. We see the major Trend using a higher time frame than what we intend to use & a lower Time frame to enter a trade.

Say we want to trade using the Daily Charts. We take the Weekly charts to see the

charts, signals, timeframe, buy, sell, trend,

Why do we need to Trade Using Multiple Timeframes?

To improve the efficiency of our trading strategy. We see the major Trend using a higher time frame than what we intend to use & a lower Time frame to enter a trade.

Say we want to trade using the Daily Charts. We take the Weekly charts to see the major trend. Suppose it’s an uptrend in a Weekly chart. We will tend to trade only long positions. We will use entries in the daily charts to enter long positions only. When sell signals are generated we will just exit our long positions. I.e. we don’t short sell.

Suppose it’s a downtrend in a Weekly chart. We will tend to trade only short positions. We will use a entries in the daily charts to enter short positions only. When buy signals are generated we will just exit our short positions. I.e. we don’t enter long positions.

Now that we are using two timeframes. Now coming to timing the entry of trades or adding additional positions. (Pyramiding) We can further use a Hourly chart to time our entries. Supposethe weekly & daily charts are in a uptrend. We will enter a long position or an additional long position when a hourly chart gives us a buy signal. Supposethe weekly & daily charts are in a downtrend. We will enter a short position or an additional short position when a hourly chart gives us a sell signal. This timeframe would not be used to exit the trades. It’s solely to improve the timing for entry. For exits we would use the signals generated in the daily charts.

Using multiple time frames to trade

We take three charts of the same security. First is the weekly chart. Next chart is the daily chart. Third chart is the hourly chart.

We will now use the daily chart to trade. We check the weekly chart for the weekly trend. Lest assume the weekly trend is up. So based on this information we will just trade long positions in the daily chart.

We look for a buy opportunity in the daily chart or we can see the hourly chart to enter a long position.

Now for entering additional positions we use buy opportunities in the hourly chart. We would exit based on the daily chart only, because we were trading based on the daily chart.

Similarly we can trade short where weekly charts are in a downtrend and daily chart generates sell opportunity. Additional positions are entered whenever sell opportunities are generated on the hourly charts.

For Day trading we can use the Hourly, 15 Min and 5 Min charts here we trade the 15 Minchart. Or we can use 15 Min, 5 Mins and 3 Mins charts here we trade the 5 Mins chart.

Good Luck and Happy Trading.

Stock Trading Profit, Earnings Can Still Be Had Today

673

Day trading most commonly refers to the practice of buying and selling stocks during the day so that at the end of the day you don’t hold any shares overnight; you sell as many shares as you buy. You make money on the difference between the purchase and sales prices.

The main motivation for this style of trading is to make money every day so you don’t sit on the shares , plus of course you eliminate the risk that the shares go down in value overnight. the motivation of thi…

day trading, stock trading, stock market

Day trading most commonly refers to the practice of buying and selling stocks during the day so that at the end of the day you don’t hold any shares overnight; you sell as many shares as you buy. You make money on the difference between the purchase and sales prices.

The main motivation for this style of trading is to make money every day so you don’t sit on the shares , plus of course you eliminate the risk that the shares go down in value overnight. the motivation of this style of trading is to reduce the risk of holding a position overnight where the open price may have significantly changed from the previous day’s closing price.

NASDAQ defined day trading by saying somebody is a Daytrader if he makes more than four buy and sell orders over a five-day period.

Prior to the year 2000 it was not uncommon for some of the most successful Daytraders to make more than a million dollars in a single day.

There were dozens of Daytrading Chatrooms where people were “told” what to buy and when to buy it.
Some Chatrooms had more than 500 members.

And most Daytraders, it is estimated as high as 99%, lost their shirt.
One of the reasons they lost their shirt is because they could trade on Margin.

Trading on Margin means that the brokerage firm which executes your trades will lend you up to 5 times your investment.
So if you had $10,000 in your trading account you could in some cases trade with $50,000.

However, if you lost on your trades, repayment was due immediately.

Since the heady dot com days of the year 2000 DayTrading has gone out of style and out of range.

Most brokerage firms have gone under or have consolidated, and staff has been reduced in the remaining firms by about 80%.

Trades that used to cost $35 to execute can now be had for as low as $4.-

Initially it happened because President Bush talked the economy down and Mr Greenspan kept on raising the interest rate to such a level that all optimism disappeared from the Market.

Up until this time like clockwork 2 or 3 days a week there were Stocks, mainly Internet Stocks, that would rise more than 30% early in the morning and then fall the same amount five minutes before closing so people could take profit.

If you were on the ball you could make a lot of money as a DayTrader.

You could also lose a lot of money.

Those days no longer exist.

It is very rare to see stocks vary more than 30% in one day so the profit potential first of all is not as great, and the ability to catch a percentage of the increase in the price of a stock has also lessened.

One of the reasons also is that Internet Stocks which were totally overvalued are no longer overvalued and as a matter of fact have risen much less than any other type of Stock.

Another reason is that there are very few IPO’s and even Google’s IPO did not take off for quite some time.

If it was not for the spectacular performance of Google , Internet Stocks lost more than 8% in 2005.

Even Ebay lost more than a quarter of its value.

However, if you are shrewd, you can still make money as a DayTrader but it ain’t easy.

What do you think happens when a company invents a car that runs on water?

If you could get news about this company very early you could make a lot of money.

Not many people know that you can trade the NASDAQ Stock Market as early as 6 AM.

So if you are a Stock Market News Hound and like to get up really early in the morning and have nerves of steel you could buy the stock at 6 AM and sell it at 9.29 AM to everybody else starting a regular trading day.

This will not happen very often, the fact that there is spectacular news.

But if you are patient it may happen once a month.

Stock Alert Program Satisfies Need for Speed

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Online investing continues to be popular among consumers, due in part to the fact that it meets most Americans’ requirements – it’s fast, easy and convenient.

Stock Alert Program Satisfies Need for Speed

Online investing continues to be popular among consumers, due in part to the fact that it meets most Americans’ requirements – it’s fast, easy and convenient.

In fact, according to research conducted by business research firm JupiterResearch, online trading households are expected to grow from 17.3 million in 2005 to 22 million by 2010.

With so many companies competing for a piece of that pie, it can be difficult at best for consumers to navigate the ever-changing landscape of online investing.

For many, the hardest part is not making that initial stock purchase, but investigating the best (and worst) buys.

So, where does one start?

Fortunately, with the advent of the Internet, consumers are only a keystroke away from a plethora of information on the good, the bad and the awful. The downside? Users can be so overwhelmed by the amount of data that the task of researching stocks can be daunting.

One company is helping Internet investors by making it easier for them to get only the news and stock alerts they want.

Centale Inc. (OTC BB: CNTL), based in Fort Lauderdale, Fla., is building a “real time” comprehensive news and stock alert application that is keyword-programmable called “Market Fragger.” Forbes.com will be the first to implement this service.

The system will allow users to customize financial news by inputting their own search criteria. The information from the search is then delivered directly to the investor’s desktop on both PC and Macintosh. Centale also plans to release a wireless application version.

This capability can potentially allow the investor to spend less time searching and more time making smart investing decisions.

Forbes.com has approximately 8 million to 10 million visitors per month.

While there is no doubt that computerized trading can be faster, cheaper and more convenient than going through a traditional brokerage house, it’s important to research your options to determine what’s best for you and your portfolio.

Your Prey for 2006

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Scouring the 52 week low is normally a good place to start. Tax loss selling has made many stocks to make the list. This is great for us, small investor. Barring any fundamental news, cheap stocks that get cheaper will be a good investment candidate.

Finance, Stock, Investing, Annual Report, Portfolio

As 2005 comes to an end, investors celebrate the coming new year and bring new expectation with it. As investors, we try to sell our losing investment before the year ends and sell our winning investments after the new year. This is to receive the benefit of early tax deduction and deferring our tax liability. Either way, after selling your investment, you have some spare cash to invest. Therefore, you would need some idea on where to invest your money.

Scouring the 52 week low is normally a good place to start. Tax loss selling has made many stocks to make the list. This is great for us, small investor. Barring any fundamental news, cheap stocks that get cheaper will be a good investment candidate. Turnaround investors look for stocks that are touching 52 week low and starts researching them. Many of them bounces, providing investors with outstanding return. Examples for this year include: ATI Technologies Inc. (ATYT, up 39% from the low), Seagate Technology (STX, up 29% from the low), Omnivision Technologies (OVTI, up 68.8% from the low) and even Maxtor Corp. (MXO, up 45% from the low before being acquired). Maxtor is now trading 120% above its 52 week low.

While stocks touching new 52 week low, do not always bounce, this is a good place to start your research. Therefore, your prey for 2006 should at least include companies that has recently touched 52 week low. These are several ideas to get you started for 2006.

Pier One Imports Inc. (PIR). The retail stores specializing on furniture and other decorative accessories, are experiencing customer defection this year. Same store sales has been declining and there is little indication that it will change. Warren Buffett used to own a piece of this company. He has since cut back on his stake late this year. It has recently fallen to $ 8.90 per share from the 52 week high of $ 19.98, a 55 % hair cut.

Shanda Interactive Entertainment (SNDA). For overseas exposure, especially China, Shanda should be on your watch list. It provides online gaming to the Chinese community, especially Massively Multiplayer Online Role Playing Games (MMORPG). Don’t let the word scare you. It is basically an online gaming portal where it lets gamers fight/play with other gamers. A good way to foster customer’s loyalty is through the interaction with other individuals. Online Gaming provides Shanda with that opportunity. It has fallen to $ 15.00 from its 52 week high of $ 45.40, a 67% hair cut. The appealing thing about Shanda is its strong balance sheet (more cash than long-term debt) and the potential growth of its market. Furthermore, the company is profitable. Those cash pile will continue to grow if that happens.

Navistar International Corp. (NAV). This company makes and distributes commercial trucks and busses. Competitors include Paccar, Volvo and the like. It is sporting a forward P/E of 6 and decent balance sheet. If it can maintain a 0% growth in profits, the stock price won’t trade at $ 28.80 for very long.

Verizon Communications Inc. (VZ). The largest baby bells of all are having a decent year on the profit line. However, concerns about competitions and high debt load, has reduced its stock price for year 2005. It is currently trading at $ 30.27 per share with dividend yield of 5.30%. Currently, dividend is about half of its annual profit, which is considered safe. If Verizon can repeat its profit performance, the dividend for 2006 will be safe. However, it currently has a high debt load of $ 34.3 Billion. The company has tried to reduce its debt using its cash flow from operations. On Dec 31st 2002, long term debt stood at $ 44.8 Billion. Therefore, balance sheet has actually improved while stock price goes nowhere.

Fresh Del Monte Produce Inc. (FDP). The makers and distributors of fresh fruit produce is not having a good year. Pricing weakness, combined with the higher than expected cost, has decimated its stock price. Recently, management has reportedly hire JP Morgan to run an auction for the company. It can be sold to as high as $ 1.8 Billion according to TheDeal.com. This translates into $ 30.70 per share. FDP recently trade at $ 23.64 per share. If the deal goes through next year, you have the potential of a 29.9% return. However, the fact that management is exploring the buyout, indicates that business aren’t so good at this company. If the deal doesn’t go through, stock price may see further depreciation.

Penny Stock Strategies

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Why should the rich guys have all the fun? The small investor can seek out huge returns too…if they know how.

Technical analysis that uses statistics for forecasting price fluctuations is one approach. However, because it is difficult to track changes in fractions of a penny, there simply isn’t enough data to be able to analyze. Therefore, you have to keep an ear to the ground when you trade penny stocks.

One of the biggest forces that drive penny stock prices is hy…

Best Penny Stocks, Buy Penny Stocks, Good Penny Stocks, Hot Penny Stocks, Investing In Penny Stocks,

Why should the rich guys have all the fun? The small investor can seek out huge returns too…if they know how.

Technical analysis that uses statistics for forecasting price fluctuations is one approach. However, because it is difficult to track changes in fractions of a penny, there simply isn’t enough data to be able to analyze. Therefore, you have to keep an ear to the ground when you trade penny stocks.

One of the biggest forces that drive penny stock prices is hype. Whether it’s online in discussion forums or chats, or offline with publicity and press, hype can cause swings in penny stock prices.

Are you looking to trade penny stocks to earn a good return on your money? Penny stocks can be profitable for some, but it can also be a money-losing experience.

What should you watch for when you trade penny stocks?

What are some strategies that professionals and amateurs use when dabbling in the penny stock trade?

One technique that some experts who trade penny stocks implement is to focus on a particular stock. Get to know the stock inside and out; that is, get to know the company behind the stock, any news about that company, and anything else that might affect the stock price. Target one stock, listen to the buzz, and see how the stock responds. The louder the buzz gets, the larger the potential for a big price swing.

Many people who trade penny stocks are small-time investors who don’t have more than $1,000 of investment capital. These people trade penny stocks because it gives them more shares for the money.

Where they might be able to buy dozens of shares in a major exchange such as the New York Stock Exchange, they can buy hundreds when they trade penny stocks. The potential for loss is big, however. It’s almost closer to gambling than investing. The money used is strictly risk capital. Once the money is gone, it’s gone.

Another subset of people that trade penny stocks are amateur investors who use the buy and hold strategy. They purchase a stock and retain it for long periods of time, hoping that the stock skyrockets at some point in the future.

Unfortunately, this strategy hardly ever pays off in the way that the investor had hoped. In the long-term, the stock could end up being completely worthless.

Trading penny stocks can be a profitable, and even fun way to invest. It certainly isn’t a traditional method of investing, and is unlike old standbys such as bonds and mutual funds. However, trading penny stocks isn’t for all people.

You should have a high tolerance for risk, a willingness to analyze every minutiae of your penny stock, and some intestinal fortitude. Have fun with penny stock trading, but don’t expect to stumble into the next WalMart for pennies on the dollar.

And remember, as with anything else in life with high potential for gain there is also high potential for loss. Do your homework, follow your rules, and plan to prosper.