If you have decided to add penny stocks to your investment portfolio then you have a taken a big step. Not everyone is comfortable with trading penny stocks online. If you want to have success trading penny stocks then you need to know how to choose them, what strategy to execute and then how to profit from them.
What is the best way to choose penny stocks to buy? Before choosing the stocks you will want to make sure that you have selected an online penny stock broker. You don’t want to trade penny stocks through a full service broker. It is much too expensive. There are many very good online stockbrokers to choose from. It is hard to go wrong.
Once you have chosen the company that you want to trade through you will need to determine what strategy you are going to use to buy penny stocks online.
I would not recommend depending on others for your penny stock advice. There is a plethora of penny stock newsletters and penny stock picking services but I find it best if you make your own trading decisions. Many newsletters and stock picking services are not reliable or trustworthy. The only person that you can trust is yourself.
I prefer to make all of my trading decisions based on technical analysis. Since penny stocks are not the most financially sound companies, if I relied on their fundamentals (earnings, revenue, etc) then I would probably never trade a penny stock. I find that it is easier to look at charts and let the current trading trend tell me what is going on and what I should be doing.
My first piece of advice it to trade penny stocks that are in an upward trend. It is never good to try to catch a falling knife. Don’t try to pick bottoms. Look for stocks that are in uptrends. Look to buy penny stocks that have broken through an area of recent resistance. When stocks bust through a resistance level they have a tendency to continue to gain in share price. The reason that this is true is than in order to break through the resistance area they had to exhaust the number of sellers that were there. If the stock has done this then there is less resistance because there are fewer sellers and the stock is free to gain in value.
But please remember that penny stocks should be traded and not held. When you have good profit (you need to determine that level for yourself) then you should sell. Don’t let the stock reverse back on you as most penny stocks will do. It you want to trade the stock again then sell it and wait for a pullback. Penny stocks are penny stocks for a reason and they usually do not make long term upward moves. Take your profit, be satisfied and move on to the next trade. Do not allow greed to cause you to lose money.
You will find great success if you stick to your penny stock trading plan but if your veer off of the path you will get into financial trouble.