Despite today’s penny stocks expansion, especially in the cannabis market, there are many persistent questions raised by people who are new to the industry – how do I earn money with penny stocks? Will I become rich trading penny stocks? How to profit in penny stock market? You may think that all these look like cracks are appearing in the industry where people are too distrustful to trading penny stocks but this not actually true.In fact, things are looking up and day trading penny stocks has become very popular over the last few years. So, where does the money come from?
First off, let’s get to the traditionally listed penny stocks which are not penny stocks per se. Regardless of the price, which can be under the $5 threshold as well, these remain as cheap stocks traded on major exchanges. Many companies have their shares dropped below a dollar or two but it would not turn them into penny stocks. The market value can plunge due numerous reasons, putting the shares of a company into trouble regardless of its reputation and net worth. Standards of the traditional exchange should be met otherwise the market will delist the stock. A company that trade on major exchange offers a certain level of confidence to investors, thus making it more secure and regulated.
So, can we profit off penny stock market? Yes, we can! Rule number 1 – sell fast. Like really fast. Penny stocks are very volatile making over 20-25% runs in 2-3 days. If you happen to make that much don’t get greedy and sell right away. You should bear in mind that these stocks might be pumped, hence 500% return is rather risky than steady given high volatility.
Rule number 2 – high volume will help you make profits off penny stock market. Considering that microcaps are usually low-volume shares, you will better focus on 75k-100k mark a day. That will give you enough liquidity to close out the position.
Rule number 3 – using mental stop losses willhelp you make profits off penny stocks market. As stated earlier, not only have these stocks been very volatile but also high bid-ask spread that may trigger hard stops and ruin your P/L ratio. For day trading penny stocks, it takes more effort and concentration to use mental stops but the rule suggests keeping an eye on the risk-reward ration than stop losses. Trade wisely, never put large amount of money at stake – cut losses to prevent further damage.
Rule number 4 – portfolio diversification and small positions will help you make profits off penny stocks market. Never go big when it comes to position sizing especially in a highly volatile nature as penny stocks. Focus on how to get out of the stock than trade daily volume. Make it a rule to trading – no more than 15%-20% of the stock’s total count. Develop your own self-discipline and you will soon unveil all the benefits of online penny stock trading. Good luck!