Trading Penny Stocks For Short Term Profits
Most penny stock traders only hold their stocks long enough to extract a profit and then move on to the next play. You’ll also hear this style of trading referred to as momentum (momo for short) and swing trading. There are lots of penny stocks that are well suited to this type of movement and the successful trading of penny stocks depends largely on this kind of movement.
Before taking a position in a penny stock (or any other for that matter) the first question I ask myself is, what’s going to make this stock go up? If you don’t have a reasonable and logical answer to this question, don’t buy the stock. It’s that simple. Your success at trading penny stocks will depend upon locating stocks poised for movement.
Most penny stocks move primarily on news. If that’s the case, you’re going to be looking for companies that actively promote their products and services and regularly make public their progress using press releases. Another way a company can release news to the public is through various SEC filings. You can find SEC filings here: http://freeedgar.com
By their very nature, these SEC filings are usually more down to earth and leave out many of the “forward looking statements” you’ll see in company press releases. Forward looking statements deal with information found in press releases where the company explains their future plans by predicting or projecting results with great optimism.
Okay, let’s say you locate a good candidate for a short term trade. You investigate the stock and find the company has a history of releasing a lot of positive press releases as well as SEC filings. It will be important to pull up a chart on the company to see if there have been historical upward spikes that parallel the release of the news. This is a simple pattern you’ll want present when trading penny stocks.
Another thing you’ll want to take note of is the present movement of the stock. If the stock is trending up, that’s another positive sign. And finally, before buying the stock, you’re going to place this stock on a watch list you create while you wait for exciting news to be released.
I’m going to include several resources here that will help the beginning to intermediate penny stock trader not only find great stocks, but to read charts as well. Good Luck!
Free Charts
http://bigcharts.marketwatch.com
Free Penny Stock Picks
http://www.1freepennystockpicks.com
http://www.thepennystockblog.com
Free Chart Reading Video Information
http://www.youtube.com/watch?v=LX9FrbODQAQ
http://www.youtube.com/watch?v=BicqST9uxTs
http://www.youtube.com/watch?v=U5-Br2DVDaw
http://www.youtube.com/watch?v=75lE7uK0fWE
