Day Trading & Penny Stocks: A Primer

Justin W —  October 2, 2017 — Leave a comment

What you might get out of day trading is very personal. Some might get a side income to help them get out of mountains of personal debt. Some might use penny stocks to build up a nest egg that allows them financial freedom and early retirement in their 40s. Others might really enjoy the day to day of small-cap stocks and their fluctuations, so they might make it a 9-5 style career.

Penny stocks are one of the avenues that day traders use to make real profits on a day-to-day basis. Penny stocks are defined by the Securities and Exchange Commission as stocks whose shares trade anywhere from $2 to $10. Anything trading under $1 tends to be listed on OTC sites and the Pink Sheets online, which harkens back to the days when penny stocks were actually listed on sheets of pink paper.

Since penny stocks are so small, how do you actually get to a profitable state while trading them? Well, as with any sector of day trading, you need strategies and techniques to cut through the noise and identify stocks that might actually make moves. The volatility of penny stocks are a warning sign for traditional, buy-and-hold investors, but a siren song for day traders of all stripes. Day traders eat their lunch, dinner and late-night snacks on volatility. The violent fluctuations of penny stocks make it that much easier to make money, when you are trading so quickly and so often.

But the key is that you must have a plan. Going into each trade with any idea of how much profits you expect to bank and how much loss you are willing to take is essential to any long-term day trading career. The stats say that 90% of day traders lose money. But that is because many novice day traders look to learn on the job, by trial and error. That results in a lot of marks losing their money.

Learn the strategies before you start trading real money is key to avoiding that sort of situation. Finding a community of traders that share your outlook and help each other with tips and advice is a great way to start trading penny stocks. You can try out a community like Warrior Trading, where you can spend time in the site’s chat rooms, with an eye on learning the ropes and making friends.

Then you can use their online day trading classes to increase your skills and absorb the strategies that will help you win, like gap & go trading. The specifics of each strategy are there for you to grasp, then you need to spend time in a trading simulator that allows you to make trades with virtual currency and learn how to plan for each and every eventuality.

Once you are making $200 a day in virtual profits, it is time to hit the real market. That experience and screen time will prove very valuable when you are trading penny stocks for real and it your actual money on the line.

Justin W

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