Day Trading With Penny Stocks

Day Trading With Penny Stocks

The concept of trading penny stocks is quite simple. Here, you invest a small amount of money in hopes for bigger returns. However, you may need to approach the alternative methodically.

But first of all, what are Penny Stocks in the first place?

Well, Penny Stocks comes in low-prices. They also are characterized as small-capped stocks as they are traded outside of major market exchanges.

Penny Stocks can give you bigger profits despite having small investments. However, even if it does sound simple, you still need a bit of expertise and luck to further profit better.

Despite being called “penny”, these stocks are way beyond that value. Considering this fact, these stocks lack liquidity,large bid-ask spreads and small capitalization. They also face limited following and revelation. You may also encounter volatility if you decide to trade these stocks.

Trading Penny Stocks

Firstly, you may want to search for a penny stock first. But how can you find one? To answer that, anything that is below $5 are considered as penny stocks. So, if you encounter a stock that is under that price, then such is a penny stock.

More so, you can locate these stocks in major exchanges. You will be provided with a list and the number will depend on whatever exchange you choose. You may also want to consider their volume as well. Some penny stock are low in volume while some are high.

The next step is quite simple. You need to limit the stocks that you are going to trade. How? Simply analyze them by reading their chart performances and overall trades. Once done, you will know which stocks gained the most within a certain period. This is what you need to go for unless you’re a contrarian trader.

That’s not all though. You would also want to study their volatility as well. This is a huge factor in any stock’s value. What you should go for are the ones that are just doing okay. You should not consider those which are displaying extremely low or high volatility.

Consequently, you will need to compare their spreads. As advised, you should look for those which considered as tight spreads. Tight Spreads display 1 or 2 cent difference.

Once you’ve done all of these, then you’re good to go. Day Trading Penny Stocks may sound simple but you might need a little luck. Profiting here will not be instantaneous. With that being said, you need to take a little patience when trading penny stocks. What you can do with the given time is observe and watch the market movements.

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