Day trading is all about short-term volatility. There is no place for Warren Buffet style investment philosophy in day trading. That is why day trading is such a good place to try your hand at penny stocks. Penny stocks are small-cap companies that trade, not for pennies, which the name would imply, but for somewhere around 2-10 dollars per share.
Contrary to the name, penny stocks do not actually cost pennies. Many investors consider different levels of share prices as penny stocks, but the upshot is always the same. You need to have the right strategies in order to profit from penny stocks.
The definitions vary, but penny stocks can be very lucrative for certain people in the day trading business. Because it is a misunderstood and neglected part of the market, the wisdom of the crowd does not apply to help even out major price shakeups. That means that you have volatility. Big fluctuations in how a stock flies out on the open market are the norm. Many times, institutional investors will look down at penny stocks because they are thought of to be prime candidates for pump and dump schemes from unscrupulous brokers.
For that reason, dabbling in penny stocks is not for the mentally weak or those prone to anxiety. You want to be ready for a 50% drop at the news of a management shakeup or a 100% bounce at the breaking news of a new patent. The crazy moves in price may lot lend itself to the buy-and-hold crowd, but if you are prepared to find the right entry and exit points, you can make profits on penny stocks.
The key word there is prepared. As a day trader, you must always have a plan for how you expect a trade to go and how you are going to react with your money. Sticking to your plan is very, very crucial to being able to avoid big losses. The other key is to make sure to trade penny stocks in volume. That is how you make money.
Risk management is one of the most important aspects of day trading and when it comes to penny stocks, there is no other way to go. You have to have a firm grasp on your risk management strategy, if you want your profits to go up.
Knowing what to look for in the penny stock market is also very important. The indicators of what stocks are about to hit a new high are discernible, but you need to put in the screen time in order to find out what those indicators look like.
There are tons of stories out in the investing press that tell the stories of college students that switched from sports gambling or poker to penny stocks with great success. But those stories gloss over the fact that it takes lots of trial and error to figure out how to do it. You don’t need trial and error. You need to visit Warrior Trading to find the right strategies and day trading community to take your game to the next level.