| There are lot of people who trade penny stocks | | | | traders will jump in along with the herd and jump out |
| successfully. But, there are way more people who | | | | when the panic sets in. This type of trading is a |
| lose a lot more money trading the same penny | | | | variation of swing trading. It definitely does work but |
| shares. How is this so? What do the successful | | | | you still have to plan the trade in advance. What this |
| traders know that the unsuccessful traders don't? I | | | | means is that you know your buy point and your sell |
| dont think its purely a case of a knowledge gap here. | | | | point in advance of actually making the trade. In |
| In today's information age, nearly everybody has | | | | essence you are figuring out what your maximum |
| access to the same data whether its newsletters, | | | | profit will be and also the maximum loss you will |
| company news, alerts etc. If it isn't just knowledge | | | | endure before you exit the position. This is basic |
| what is it? We think its a combination of consistency, | | | | advice if you want to trade penny stocks but you |
| planning and managing their emotions. Lets get into | | | | would be surprised to see a lot of traders who will |
| each one of these: | | | | fall for the herd mentality. Don't be one of them. |
| 1) Consistency | | | | 3) Managing the emotions |
| You have to have a system when trading penny | | | | A common investment adage sums it up nicely - 'Bulls |
| stocks. Subscribing to several newsletters and | | | | make money, bears make money, but pigs get |
| following trades of several gurus in a random manner | | | | slaughtered'. Decide which direction you expect the |
| is a recipe for financial ruin. If you are going to seek | | | | trade to go and stick to the rule # 2 above. We |
| advice, seek out one person and learn all you can | | | | would like to add that understanding behavioral |
| from their books/seminars/newsletters. Absorb all of | | | | finance is essential to being successful. Its important |
| it and apply their tips as you go. The good penny | | | | to be aware of common mistakes associated with |
| stock traders have a system that works. Follow it. | | | | the psychology of investing. All traders are people. |
| 2) Planning/Strategy | | | | People are emotional. Thats why markets are volatile. |
| A successful trading mentor of mine used to say - | | | | Learn how to manage your emotions and gauge the |
| 'The profit is made before the trade'. Its a little hard | | | | emotions of the market. This will hold you in good |
| to wrap your arms around but it makes sense once | | | | stead in the long run especially if you want to trade |
| you have been trading for a while. A lot of impulsive | | | | penny stocks. |