| Penny stock trading can be a lucrative business to | | | | comfortable with. |
| get involved in, however, there is one particularly | | | | A second criteria is to trade penny stocks with a |
| important factor to keep in mind: Not all penny | | | | narrow spread. You will find that most of the time |
| stocks are created equal. The best penny stocks for | | | | the higher volume stocks will have the tighter spread. |
| trading are ones that meet specific trading criteria. | | | | By spread I mean the difference between the bid |
| Let's review a few criteria that you should pay close | | | | and the ask. So if a stock is trading at $2.30 bid and |
| attention to. | | | | $2.35 ask then it would have a 5 cent spread. I would |
| But before we begin I want to once again define | | | | much rather trade a stock with a 1 cent spread. The |
| what is meant by a penny stock since there can be | | | | 4 extra cents will begin to eat into your profits over |
| a great deal of confusion about this. A penny stock is | | | | time. If you are an active trader then it can make a |
| any stock that is trading at less than $5 per share. | | | | significant difference in your profitability. |
| Penny stocks are not a reference to only those | | | | A third criteria that I would user to determine the |
| stocks that trade at less than a penny per share. | | | | best penny stocks for trading is to look for stocks |
| So with that out of the way let's take a look at | | | | that have had a recent pullback following some |
| three specific criteria that the penny stocks you | | | | positive news. The positive news will serve as a |
| trade should meet. First of all, the best penny stocks | | | | catalyst for trading the stock long. Often following |
| will have good trading volume. If there is poor volume | | | | positive news the stock will make a significant run to |
| the stock is more likely to be manipulated at some | | | | the upside. At some point during this run traders will |
| time. Low volume stocks are easier to move by an | | | | be satisfied with their profit and will begin to sell. This |
| individual trader. I do not want to be in these low | | | | selling will cause downward pressure on the stock. |
| volume stocks for fear that a well capitalized trader | | | | Often it will be pushed toward a support level or a |
| may attempt to move the stock in the opposite | | | | moving average line. At this point it will begin its |
| direction that I want it to go. Personally, I would like | | | | upward move again. You want to try to enter the |
| to see volume of at least 500,000 shares per day. | | | | stock when it is pushed back to the support level. |
| You need to determine which figure you are most | | | | |