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Penny Stocks And the Art of Making a Profit



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Finding the right career path is a daunting challenge for most young people. Even if you start out on what you think is the right path, you can lose your way and want to find a different way. These days, it may be easier than ever to figure it out.

The job market is growing, along with the economy. That means it is easier than ever to find gainful employment. But the end result will most likely be sitting in a boring cubicle with too much work, too many bosses and only just enough in salary. Finding a way to extricate yourself from the typical corporate monotony and still enjoy a middle class or upper middle class lifestyle is the ultimate dream. One of the avenues to that reality is day trading.

The key with penny stocks is learning how to trade them in the right way. You want to be mindful of the risk and not just in a place where you can lose everything with one single trade. Like anything else, you need to take the time to learn about day trading and penny stocks before you really jump and lose your shirt. Risk management is such an important part of the path towards being a good day trader.

Penny stocks are not going to be found on the New York Stock Exchange. These are smaller companies that are not highly coveted by investors. But you can see a significant amount of volatility within these stocks, if you are looking at the right times. Sometimes it can be a news event that triggers a penny stock spike. Or it could be a trend in the market that is predictable and catchable.

You are not going to invest in penny stocks with the plan to get rich overnight. Or on one trade. You are not going to find the hidden Amazon lurking at 2 bucks a share, load up on 50,000 shares and then wait 10 years to see it go up to $1,000 a share. That is a fool’s errand. No one can actually pull that off.

The good part of penny stocks is that you can jump on large spikes in small caps stocks day after day and build up your overall profits. The key is to keep your wins big and your losses to a minimum. If you have  a 2:1 profit to loss ratio on your trades, you only need to hit 60% of your trades to come out ahead. The key to doing that is being diligent about your research and ready to cut bait on bad trades at any time.

Risk management a part of penny stock trading because you need to be able to understand your risk profile at all times and keep your account from getting underwater with big dips in the market. When you keep your eye on the prize and avoid terrible trades, you can come out ahead in any type of trading.