The Secret To Making Money Trading Penny Stocks
I am going to tell you a couple of secrets about making quick money trading Penny Stocks. Before I begin I want to tell you exactly what a penny stock is. A Penny Stock is a stock that trades at a relatively low price and market capitalization, usually outside of the major market exchanges. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB and pink sheets. We consider Penny Stocks to be less than $5.00.
The first thing you need to know about these cheap stocks is that they are often manipulated. Since the market cap is so low on most of them accompanied by a low float, it is easy to mess with the price. This is usually done by stock promoters who are paid to send out emails promising the moon about a particular stock. If they send an email to 40,000 people and 1,000 people act on the recommendation then the pumpers can unload there stock on you. Less common, but almost hard to detect is manipulation by pumpers and bashers on stock forums. With these facts it is easy to see why penny stocks make great trades but terrible investments.
My first secret to being successful is having a list of Penny Stocks To Watch. You need to have a great list of penny stocks to watch and you can this at pinksheets.com. Look for the big gainers or even big decliners and add them to your watch list with your broker. Most brokers will let you set price alerts at no cost. Look at the charts and analyze support and resistance and set your alerts .01 cent above resistance so you know when to enter. You should always update your penny stocks to watch and keep track of what stocks are being pumped.
Now I am going to unleash my biggest secret. Are you ready for this? You need some software and you need to be selective. I personally use equity feed for my software. What you want to do is set your scanner to 25 trades and 25,000 units in volume. Then set your max price to $1.00. You can find stocks that are making new highs and then look to make sure you see volume coming in. If the spread is too large or the volume does not keep going then don’t get it. I prefer to see if the stock is still making new highs around lunch. If it is still making new highs around lunch then I will take a position. If you keep track of all your money then you can watch for popular stocks to crash then look for that green day and try to jump in and take a position. If you
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