Basic tactics of trading penny stocks

Basic tactics of trading penny stocks

So here were are. You’ve decided to get into trading penny stocks. It doesn’t matter whether it’s part-time or full-time, keep reading to know what you should do to be successful (order of tasks is important!). What are the basic tactics of trading penny stocks? Read this linked post for further basic strategies.

 

Study and learn

It would be foolish to get behind the wheel of a Porsche 911 4S with no license or experience and expect to be a great driver. You need to know the basics – it’s the same with penny stocks. I’ve been learning the theory for 4 months by using these tools.

 

Come up with your ideal 1-2 setups

Just as you cannot expect to become a world-class chef by cooking random ingredients, it’s very important to pick 1 or 2 setups that you feel comfortable with and become a master. Know everything these is to know. For example if you are going to be buying earning winners breakouts learn everything about them. For example, what happens to it in a bear/bull market?, how does the pattern evolve and change with, for example, the ‘january effect’?

In order to become a setup master you need to understand the pattern inside-out, back-to-front. Also, it’s important that before you throw away a setup you are testing and proclaim it does not work, that you give it a chance. It’s no good undertaking 5-10 trades to discard it – it needs to be statistically relevant!

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Research the best brokers for your strategy

Not all  brokers are created equal. See the FAQ’s and my broker recommendations.

Some are great for shorting, others better for buying. Some are located offshore where you can avoid the pattern day trader rule , others have high minimum account balances. Once good source to review different brokers is Investimonials, however its’ not the only site and can be a bit out of date. Google reviews, compare fees, benefits, learning curves etc. Some brokers are discount brokers, others are full-service.
These are only the basic tactics of trading penny stocks, see the related post for more tactics.

Let me know what stage you are at – how are you finding the transition to the next step? I’d be interested in your comments!

Post Author: Bart Puszko

I started day trading stocks in 2016. My passions include Liverpool FC and swimming.

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