We all know that trading penny stocks is very risky, but it is also profitable. These shares can vary from 0.12 $ TO $ 22 in very short time. But this is not the case with every penny stock. There many techniques for trading penny stocks, three important strategies are given below
Find cheap stocks at stock exchanges
As the name suggests shares of penny stocks are valued under $ 5. Trading penny stocks that listed in formal stock exchanges are safer as compared to other penny stocks as stock listed on stock exchanges has to follow reporting instruction. However finding cheap stock at stock exchanges is difficult task. Penny stocks available on these stock exchanges are not of small companies. These companies are trading such shares probably due to financial trouble. When you are opting for this method you have to see why particular penny stock is trading on low price.
Penny Stocks in OTC market.
Penny stocks are traded on over the counter market. Penny stocks traded on OTC counter or pink sheets are of startup companies or small companies with share price of less than $ 1. There are thousands of penny stocks available in market, to find out worthy stocks you have to do complete research as 95 % are useless. OTC penny stocks have more risk, like they are highly liquid, not all shares traded daily. Sometimes when you buy OTC penny stock, you fail to sell it on profit due to their low volume and high difference between bids and ask price.
Majority of OTC market stocks are of low quality, worthless stock, only few of them are good for investing, but with full research. Key point is how to find worthy stick out of such junk stock.
Deal with Pump and dump activity
Pump and dump is unethical practice and very common in penny stock trading. Scammers buy large amount of shares like low priced OTC penny stocks, they promote this tocks to influence the market and to investor buy the stock, and it results in increase of share price. When price increases, these scammers sell all their shares immediately. This activity reduced the share value to zero, investors fails to recover from such situation.
Try to identify pump and dump activity as soon as possible, try to sell all your shares when prices are rising, further more try to close your deal before price collapse. This method is very risky and unethical because you are doing the same what scammers are doing. The other reliable method is to track the pump and dump penny stock at right point; this needs complete knowledge and full research.
Whichever method you may choose, but keep in mind that trading penny stocks is very risky option of investing. Gaining complete knowledge and research is very important for trading penny stocks. Dealing with penny stocks is absolutely crucial. With sound technical knowledge and thorough research you can earn big profits from penny stocks trading.