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Strategies For Buying Penny Stocks

By Keith E Guyette

We’ve written a lot of articles about picking the right penny stocks. This is obviously a very important step, the next is timing your purchase. When should I buy and how many shares should I buy are also important questions to think about. You should have your strategy mapped out before you make your trade.

The goal is to make money and you are able to do this if you buy low and sell higher. This will not always happen and you have to have your strategy in place. Be prepared to take a loss, will your sell be triggered by a certain % of loss or will it be triggered by support breaking. Set your stop loss and forget about it. You are buying the stock because you expect the price to rise, when it doesn’t there was a flaw in your strategy or your penny stock picks. Look back at our articles on how to review a company and what to look for in share price as well as share structure. If you do your due diligence and the stock drops in price you need to have that stop loss set. A penny stock can and will have you lose every cent you’ve invested in it if your not careful. Being able to minimize losses is a must when trading these low priced over the counter stocks.

Some traders will buy a company at a support level but will be prepared to add more shares if the company dips again where they will then add more shares. This can be a solid strategy but its risky as the stock may continue to fall and now you’ve lost more of your initial investment. The strategy can payoff by buying a second lot of shares and the price rises, you can sell, mitigating the loss on the first batch and sometimes covering the cost all together.

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You sell shares to gain profit as the goal. Selling to avoid losing more money locks you in for a loss but that loss can be a lot smaller than full loss of investment. In the penny stock market you will take a lot of losses and have a lot of runners. What you need to be able to accomplish is let the winners run and maximize profit while dumping the mistake and lessening your losses. Cut your losses and let your runners run and never ever look back.

Selling for a profit is even tough. You may think its easy but its not. Your trading a thinly traded stock with a low float, you make the right call and news comes. The stock takes off and every tick is 30% gained and the amount keeps getting higher. Not selling has been reinforced now the stock begins to dip, if you sell here you lose a percentage of what you could’ve had, as you hesitate, the stock dips more. You hope it goes back up to the high and don’t sell. This happens all the time. Thats why we never look back. You will sometimes sell at the top and sometimes you’ll miss you can’t look back. Penny stocks are a quick trading game. Sometimes a split second is the difference between a thousand dollar gain or a hundred dollar loss. You need to be able to take quick profits as well as realize when you have the runner. Plan your trade out before time, entry and exit, then remember to trade your plan. Never fall in love with a penny stock.

Here are some great Penny Stock Picks

We’ve been trading all types of stocks for many years. We also provide advice to others whether its a beginner just learning how to trade or a seasoned pro looking for input on a particular trade. Do not use our advice as a buy and sell signal but use it as the floor to base your own due diligence upon. As traders we wish people only made money but that’s not the way it works in reality. Therefore we have to take us much gain as possible while limiting the losses. Try OTC Bulletin Board if your looking for even more trading information.

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