Scale In With Penny Stocks

trading penny stocks, most less experiencedback. Then perhaps another opportunity comes to
investors buy and sell all at once. If they've gotlight, or maybe your kid needs braces so you use the
$1,500 to invest, they put the full $1,500 all into amoney for the orthodontist. The downside to Scaling
single investment, and usually all at once in a singleIn is that your broker commissions will be higher, but
trade. This isn't a wise trading strategy, and anyonethat’s not really a big deal since most stock
who knows my story ( ) remembers I learned thisbrokers charge such low commissions.
lesson the hard way.When you're selling penny stocks, you may want to
When trading penny stocks, you should always ScaleScale Out. It's not usually a good idea to dump all
In, and when selling penny stocks, you should alwaysyour shares onto the market all at once, unless you
Scale Out.only have a very small position in the company. With
Let’s say you have $6,000 and want tothinly traded penny stocks, unloading even 25,000
invest it into ABC Company. Instead of puttingshares could push the stock price down while you
$6,000 into the company immediately, you onlyare selling.
invest $2,000 at first.A lot of people use the very common, and
If that penny stock starts going higher, the twosomewhat effective strategy, of selling half of a
thousand dollars is in a profit position. If it starts goingposition if their investment doubles. This gives you
lower, at least you’ve saved the loss thatback your original investment, and then the idea is to
the other $4,000 would have taken. At that point, iflet the other half ride. I find it more effective to exit
you still believe in the investment, you could Averageand enter positions in three, four, or even eight
Down by buying more shares with the $4,000 that isdifferent trades, as long as you are doing it with
still on the sidelines.enough money each purchase to make it worthwhile.
This strategy has even been employed in turn of theI usually space these purchases out over months,
century military tactics. A good general always holdsand sometimes years.
back some of his troops, and can then respondI bought Absolute Software at 80 cents. It scared
based on the results of the first attack.me by immediately going down to 40 cents, but
By Scaling In, you stay dynamic and keep yourLeeds Analysis provided clarity on this stock's
options open. It also buys you time. Time to thinkdirection, so I didn't worry.
about the decision you made, and maybe rethinkSoon Absolute reversed, and within the next two
what you are doing with the rest of the money. Ityears approached $8.00 per share. I sold three
also allows you to watch as other events occur,different chunks around seven and eight dollars, over
while still having the option open to buy more shares.a couple of months. Rather than dumping all the
For example, you might Scale In with a buy inshares at once, I proceeded cautiously, and took my
February and come back with a secondary purchaseprofits a piece at a time.
in July, and a third in September. In between each ofIt’s also a good idea to Scale In or Scale Out
these purchases, you have time to assess thesurrounding an event. For example, a company is
situation and see new events that occur with thegoing to release their financial results, and you expect
company, with the competitors, and with the overallthe numbers to be strong. You might want to buy
market and industry. You will simply be moreshares with part of your money before the release
informed.of the financials. Then you keep part on the sidelines,
It also keeps your money on the sidelines so thatuntil you see the actual results. At that point you can
you're open to other ideas. For example, say youdecide if you want to put the rest of the money in,
were going to put $6,000 in ABC company, butor perhaps now you've changed your mind.
instead you decided to scale in, and you held $4,000