When looking for a penny stock to buy take your time and know some basics before you begin.
Profitable penny stock investing requires a carefully constructed approach. You might know the best way to research and discover the penny stocks which are worth purchasing at a great share price which includes excellent potential after which you can make your buy. Without a control strategy you might find yourself watching your profits and even your capital vanish all of a sudden. Regardless of the kind of strategy you choose whether it is, Swing Trading, Technical Trading, Day Trading, Momentum Trading, Scalping, all of the following suggestions will let you reduce risk and generate profits from penny stocks.
Here are a few several guidelines
Never Chase a Stock
Chasing occurs when you bump up your bid price aggressively and frantically as a way to acquire a particular stock. This is a bad and highly hazardous approach. Every time a stock is 'running' many traders will purchase it at the same time and purchasing pressure will drop. This is usually accompanied by a related decrease in the price of the stock. You will greatly lower the risk of a loss by simply never chasing after a stock. If however there exists a stock that you just 'must have' and feel certain it will keep climbing, set and stick to a maximum chasing of 5%.
Stick to Convention - Buy Low...
Many good penny stocks to buy almost always look unpromising before rebounding. Be like the sensible traders buy in the dips and sell close to the high. Whenever you sell, you are going to be making money off buyers who are chasing the stock!
Average Down
Try not to purchase a penny stock all at once. Buy it in a minimum of two lots. As an example if you are getting $2,000 worth you ought to begin with a $1000 purchase then pay attention to the stock price prior to acquiring the final $1,000. The lots do not necessarily have to be equal amounts. Buying in this manner you may lower your financial risk. If the price drops after your first buy, you have only risked fifty percent of your cash. You can subsequently sell, hold or if you are positive the shares will show gains, you can then buy additional shares at a cheaper cost. This practice is 'averaging down that is an easy way of decreasing the average cost per share on your purchase.
Sell Smart
To profit via purchasing a penny stock the asking price needs to go high enough to recoup your trading commission, and continue increasing to produce a gain. A smart instance to exit is when the price of the stock has increased 20% after your average cost. In case the stock seems to be on a run-up it's still advisable to sell at around a 50% increase. You could possibly miss out on a certain amount of possible profits but recognize that most shares that run up often go back down. It is more difficult to sell when a share is falling quickly. When everyone is trying to sell a particular penny stock, place your limit order below the bid. This can often get you a quicker fill at the bid. Also, you don't have to go through the time consuming process of dropping your sell price if the bid drops.
Partial Sales for No Loss
If a penny stock has increased enough for you to sell enough of your shares to get back your original investment then do a partial sell and enjoy the ride with free money. This way you will have guaranteed you won't bear any reduction of your original capital investment. Furthermore, you've now freed up the capital to perhaps make a second investment.
Set a Loss Limit
Not all penny stocks will increase. Sometimes even the most heavily studied penny stock can defy almost all analysis and start rapidly declining. Fix a limit of how much money you're prepared suffer a loss of and stick to it. Minimize your losses, recover some money and begin your analysis anew.
Once you find a penny stock to buy and you follow these basic tips you will begin to turn a profit.
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