| In order for a penny stock trader to be successful | | | | bounce around from trading idea to trading idea. |
| there are certain rules that he/she cannot afford to | | | | They get their ideas from friends, financial TV |
| ignore. I would like to touch on three crucial rules in | | | | shows, tip sheets, recommendation services and the |
| this article. If the penny stock trader fails to adhere | | | | like. You need to do your own research on a limited |
| to the following rules they will be doomed to failure in | | | | number of stocks (20 or so) that meet your trading |
| the trading game. So let's jump right into them. | | | | criteria and then wait for them to make a signal |
| The first trading rule is to never commit too large of | | | | indicating that now is the time to trade them. |
| a percentage of your overall account to one | | | | You may be asking what signal you should be looking |
| particular trade. Though you may benefit greatly if | | | | for. It really doesn't matter as long as you put a |
| your trade happens to be correct the risk of being | | | | disciplined trading program into practice. You can build |
| wrong is too great. Penny stocks are capable of | | | | systems around moving averages, support and |
| large moves in both direction. If it moves for you | | | | resistance lines, candlestick patterns, etc. It is up to |
| that is great. If it moves against you that is not so | | | | you. Just determine what is going to serve as your |
| great. If you were to commit half of your account to | | | | trigger and stick to it. |
| one particular account and that stock got cut in half | | | | The third rule ties in directly with the second rule. |
| then you would lose 25% of your account. That is a | | | | Before you enter the trade you need to know what |
| steep penalty to pay for being wrong. If your | | | | is going to cause you to close the trade. You need |
| account is small ($10,000 or less) then I would never | | | | to know this for both the profit side and the loss |
| commit more than 25% of your account on any one | | | | side. You may set parameters of a 20% gain or a |
| trade. If your account is much larger, I would never | | | | 10% loss. You might use a short term moving |
| commit more than 10%. | | | | average to determine when to get out or you might |
| The second rule you must adhere to is to always | | | | use the violation of a support or resistance line. |
| know why you are getting into a trade. You need to | | | | Whatever you use, determine it before the trade. It |
| have established criteria for putting your hard earned | | | | will save you a lot of money in the long run. |
| money to work. Too many penny stock traders | | | | |