When approached with the right strategies, day trading in penny stocks is a very rewarding activity. Of course, the rewards will be a better bottom line for your investment portfolio while investing a relatively small amount of money compared to other options. For both first-timers and experienced day traders in penny stocks, the following strategies have proven very effective.
Good Broker Relationship
You must establish a good working relationship with your broker, which is more important than going for a cheap broker. Keep in mind that you get what you pay for and this applies to your broker, too.
Better yet, try to find a broker that asks for reasonable fees and delivers on the goods of professional service. Of course, you must also be a good customer in order to get good, even excellent, service from your broker. After all, day trading is a two-way street!
Keep Track
With penny stocks, you have to check the prices anywhere from 6-10 times daily. You will have a difficult time at it if and when you do so in a manual manner, thus, the necessity for a personal computer with a fast internet connection as well as a landline connection to your broker. This way, you can make informed decisions and take action as soon as the circumstances favor it.
Another reason for keeping track of the penny stocks you have in your possession or you are interested in acquiring is that you may find that your buy or sell order is only partially filled. In this case, you will be paying for a hefty commission - often at 10 percent - for a few shares of penny stocks, say $200 for $20 commission. Needless to say, you are at a loss here.
However, if you can keep track of your investments, you can adjust the sell or purchase price until such time that you can have the order filled within the day. That way, you will be paying for just one commission for many orders instead of paying it over many days for numerous transactions.
Plus, it pays to keep track of the investments in order to determine the lowest and highest ranges of the stock activity. You will then be able to give your broker the go-signal to sell or buy orders based on this information.
Look At High Volumes
One of the more notable determinants of the right time to submit your orders are to look at the penny stocks with both high volumes of ask and bid lots. Once you have determined these penny stocks, you have to calculate the difference between lots. If the difference is at 15 percent or more, you might want to place a buy order at the bid price. If it is filled immediately, then place it in a sell order at its ask price. It is relatively simple when you come to think of it.
Day trading in penny stocks can be very straightforward if and when you know the basics. However, you will also need a bit of luck and a lot of patience as well as the ability to rake in the profits at the right time. Add in hedging, too, once you have acquired sufficient experience and exposure in the field and you have higher opportunities to make a killing.
