Jun 12, 2011

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Day Trading Penny Stocks

Day Trading Penny Stocks – Risk vs Reward

day-trading-penny-stocksDay trading penny stocks can be risky business. It is like going to the casino from time to time with money that one can afford to lose. Great if they win, oh well if it is lost. Penny stocks are one way to have a little fun in the stock market. It may not be as risky as a slot machine and there is a small chance that a penny stock company is the next big thing.

Small starter companies can be a good speculative choice as long as there are limits to the amount of money invested and research is done to prove the companies viability. It is very important to research the company history and management as well. Day trading penny stocks is not for everyone.

Day trading penny stocks on the OTC

Small company stocks are usually traded on the OTC (Over the Counter) boards and some are called Pink Sheets. Some of the companies report their income and expense reports while others do not. It is easier to make better judgments about a company if more information is available. As with any stocks, it is buyer beware. This is particularly true of penny stocks where the price per share can range from .0001 up to $5. Anything under $5 is considered a speculative or penny stock. Day trading penny stocks can be exciting and dangerous. Proceed with caution.

News or developments in a company can cause great excitement in the stock price. At these prices, the stock can move up or down very quickly. It is important to watch the price action carefully. A pre-set sell order can be ready to sell the shares if the stock prices falls below a comfortable level. Sell orders can be set if the price were to rise to a point of profit as well.

Day trading penny stocks can be challenging. Many penny stock players watch the market every day and use streaming quotes that are only a few seconds behind real-time stock market prices. Watching the price fluctuations through the day is the best way to keep from loosing too much money. Rumors can make a company stock rise in anticipation. Riding these types of highs requires caution because many of the professional penny stock players will sell as the news comes out which gives them better profits as shares are being bought because of the news. There are times when the stock rises after news comes out as well. It may be best to practice picking stocks before investing real money.

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