Sub penny stocks are attractive to a fairly wide group of investors, but remain extremely dangerous when the buyer has a longer term approach. Don’t get me wrong, there are savvy traders who make decent living scalping sub penny stocks for fractional profits on ETrade and other discount firms everyday. But does that mean everyone can do it ? Absolutely not.
Last Friday, here at PSE, we alerted our subscribers to a technology sub penny stocks name. The company was Findex.com (FIND.OB) and it was simply a fallen, broken down stock. So you are probably asking yourself why we issued an alert ? Well it’s pretty simple. We understand that some penny stocks should be treated as pure trading vehicles. Especially sub penny stock names. We also realize that most of the investors who make money trading these speculative names are not novice investors. This is why we try to provide a game plan when issuing sub penny stocks alerts. For instance, while we felt that FIND had some upside on a short term trading basis, we instructed our subscribers not to buy the initial gap up in the shares. Those who followed our guidance were handsomely rewarded. We also preach that traders should take fast, smaller profits to reduce risk. Now this stragey obviously limits upside, but buying gaps and holding on for too long is often a recipe for disaster. It usually doesn’t matter if you are buying General Electric (GE:NYSE) or the latest hot penny stock.
SUB PENNY STOCKS Are Risky
These mistakes are often amplified when trading sub penny stocks because of the sheer share amount owned by traders and the wide percentage based spreads. The large share size that can be obtained for a small cash outlay can also dangerous for buyers of sub penny stocks. Investors often forget that the names didn’t intentionally try to be priced at such low levels, and are trading at such low levels for a reason. These companies can also possibly see further dilution or even a reverse split.
So keep in mind that successful traders of sub penny stocks often just make their money sitting on the bid and then catching some momentum with the hopes that they can unload their position on the offer or ask price or hopefully a little bit higher. Remember that trading such low priced securities is a dangerous game, so the sidelines are sometimes the best place to be unless you have a plan.
Check back with us at PSE because we are currently scanning a list for our next potential winner in the sub penny stocks area.
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