Penny Stock Trading
Penny stock trading is the trading of commons stocks that are sold for less than one to five dollars for each share. Penny stocks are also known as micro cap (or nano) stocks which normally trade for under five dollars per share. Penny stock trading takes place on the Over the Counter Bulletin Board (OTCBB) or the Pink Sheets, and therefore penny stocks are also referred to as over the counter stocks. These smaller stocks are typically offered by smaller struggling companies or newer companies. They havenít proved that they are stable enough to move to the larger stock exchanges such as the New York Stock Exchange. Penny stocks are determined by their share price, per the SEC, and not their market capitalization or listing service.
Penny stock trading can riskier than trading regular stocks and should therefore be treated as seriously as trading regular stocks found on the NYSE. When penny stock investing, it is important to note that there are four disadvantages to investing in this type of stock. First, there is a lack of background of the companies traded in these small amounts. These companies have little business history or could potentially have a very negative business history. Before you begin to trade penny stocks, you must research each company to determine their potential. If the company is not headed is a good direction, then you wonít make any money by buying shares in the company.
Second, there is limited information regarding the companyís financial status when penny stock trading. It is hard to research each company because the OTCBB and Pink Sheets do not have the same strict reporting requirements as the major stock exchanges. Without this valuable information, it is very difficult for investors to invest wisely, especially if they donít take the time to research. Third, most penny stocks are illiquid. This is due to the fact that there is no interest in the future potential of the stocks which leads to lower share prices. Lastly, penny stock trading has tax consequences for day traders. For investors who are day trading penny stocks, it pays to work with a tax specialist to ensure awareness of the tax consequences and benefits involved.
Investors new to penny stock trading will find it beneficial to practice online paper trading before trading with real money. Paper trading is a great way to find out whether or not a particular system is right for you without finding out with real money! It is definitely possible to make a nice living investing in penny stocks of small or future businesses, but you must be sure that you find reliable resources and tools for building your list of penny stocks to watch. Once you understand what to look for in a small company, you can begin to trade with real money instead of paper trading. Just be sure not to fall for hot penny stock scams where manipulative investors pump and dump stocks! Rely on your sources and judgment and invest in companies that you believe are a sound investment.
Market Direction: The mid-to-late summer trading activity is usually relatively boring in the stock market. The lack of volume obviously shows that most traders are outside doing other things. This usually makes the efforts to produce profits more difficult. Fewer traders equal less movements. However, utilizing candlestick analysis still allows an investor to participate in the trades that are creating opportunities. The scanning techniques are relatively simple. Using the simple steps found in the Candlestick Forum's training CD, "Scanning for High Profit Trades" will consistently produce a supply of potentially strong trades. The only difference in the summertime is that the number of potential trades maybe much smaller. But that should not matter. Most investors require only one or two trades each day. It does not matter that those one or two trades come from a supply of three potentially good trades or 30 potentially good trades.
The same criteria, for finding strong trade setups, occur in slow-moving markets as they do in faster moving markets. The different expectations should be obvious. The magnitude of price moves is going to be much smaller as a general rule. Price trends may move in a very choppy slow upward or downward trend. The analysis of the market and individual stock prices have to take into consideration that there will be a different dynamic when less people are around the trade. Fortunately, candlestick analysis always incorporates the Japanese Rice traders' advice, "let the market tell you what the market is going to do".
When trading gets slow, the candlestick investor still maintains advantage of being able to use the information built into price patterns. Price patterns are created by the same investor sentiment time after time, not necessarily influenced by what the markets are doing in general. The Jay hook patterns, the cradle patterns, the Fry pan bottom pattern will all work equally well during any market conditions. As with individual candlestick signals, there may be fewer patterns identified. Once again, it may only require one or two strong price patterns during a sluggish market to satisfy most investors.
Establishing positions in chart patterns that are setting up great two advantages. If the price does do what it's supposed to, in spite of general market conditions, good profit to be made. If prices don't do what they are expected to do, such as a break out to the upside, the price will usually maintain some strength even if the market it is moving severely in the other direction. At least the positions will not normally create large losses.
Candlestick analysis is the accumulation of common sense investment practices throughout the centuries. It not only identifies the big-profit trade potential's, it incorporates a system of common sense trading practices that provide an easy to establish discipline. The analysis itself identifies investors' strength and weaknesses. The visual aspects make target projections much easier. Simple entry and exit strategies improve the probabilities of being in and out of a trade at the appropriate times. Simple stop loss strategies can be applied. Candlestick analysis covers the whole spectrum of investing successfully. Many investors find that the training available on the Candlestick Forum does not involve only finding the most successful trades, but it also illustrates all the other aspects involved for successful investing. This is not a difficult learning process. For those investors that have taken the time to accumulate the knowledge built into the candlestick signals, any investing they do in the future becomes better thought out.
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