Do You Know These Strategies for Buying Penny Stocks?
Buying penny stocks is not easy. But, it can be if you have the right tools at your disposal. When starting to trade penny stocks, some investors quickly find themselves in the red. And without a commitment to education and dedication to learning, this will remain the case.
But, consider this. You wouldn’t perform an open heart surgery after reading a few articles on how to do it. While this may sound extreme, buying and selling penny stocks or any stocks for that matter is the same thing.
So, when making a watchlist or even just glancing at some penny stocks to watch, it’s important to know what your strategy is. This goes beyond just researching how to trade penny stocks. Rather, there are some nuances that all investors should consider.
For one, penny stocks are highly volatile. Whether due to large speculation or simply the fact that they are stocks under $5, price fluctuations are very much commonplace. While this may seem scary at first, knowing how to capitalize on it is what makes certain traders profitable, and others not so much.
In addition, traders need to understand their unique goals. Are you saving for a new house? Trying to make a living? Or are you working to bring in some extra income on the side? These questions can help to define whether short or long-term investments are better for you.
After taking an inward look, it could be time to start educating yourself on exactly how to trade. So, to help with this process, here are a few penny stock trading strategies that you need to know about.
3 Penny Stock Trading Strategies to Utilize Daily
- Making a Penny Stock Watchlist
- Picking the Right Penny Stocks to Buy
- How to Take Profit With Penny Stocks
Making a Penny Stock Watchlist
Last week, we covered how to make a penny stock watchlist in an in-depth piece. However, to refresh those just now coming onto the scene, let’s give a brief overview. Building a proper watchlist involves three things. First, traders need to build an under $5 scanner. This can be done on a variety of platforms, but most tend to use ThinkorSwim.
This is an all-in-one application made by TD Ameritrade. It allows for trading yes, but also the ability to build complex and concrete scanners. In the simplest of terms, traders should scan for stocks under $5 with a volume of over 1 million. This will give a list of a few hundred penny stocks. While the $5 part is self-explanatory, having a volume of over 1 million will help to ensure that there is enough liquidity to enter and exit a position.
Those under the 500,000 range, for example, many not allow for swift buying and selling, therefore it could be more difficult to swing trade penny stocks. In addition, low volume will mean that a stock could jump and fall in price with little to no indicators. This…