Day trading is the buying and selling of a penny stock within a single trading day. Day traders make profits by taking advantage of small price movements in highly liquid stocks. Day trading is designed to produce short-term profits. You can learn to reduce risk and harness the profit potential of day trading by using the following strategy.
1. Get education
The set of skills needed to make a full-time living day trading penny stocks can be acquired with education. Learn about penny stocks. Micro cap stocks have less available information than stocks that trade on the major exchanges. You have to do a lot of personal research. I suggest you take a stock trading course. There are several online. The courses might not be not cheap, but will seem minimal when your profits start coming from the stock market. Look for stock publications like Penny Stock Magazine and Penny Stock Preview they will greatly increase your education.
2. Find a broker
Open an account with a direct-access broker. Find a broker that handles penny stocks. Not all stockbrokers handle penny stocks mostly because of the small commission on these low low-priced stocks. There are discount brokers that have lower commission rates and smaller initial deposits. Check out any day trading firm you are considering doing business with. Call your state SEC to confirm that the company is registered with the SEC. Ask about any record of complaints the firm has had with regulators or their own clients.
3. Know your sectors thoroughly
Choose stocks that you have researched and have information about. When investing in stocks it is important to understand the industry the companies are in. Review historical charts to learn about its past performance and look at its earnings report to find out if it is profitable. Micro cap stocks cover a wide range of industries so it is best to work with companies whose products and services you understand. If the stock is an IPO (initial public offerings), read the prospectus of the company carefully to know the financial details of the company such as amount of debt and amount of capital.
keep a list of about 10-20 sectors in a sector minder on your screen continuously. Sort then by their % change from the open so that you can see exactly how much they are up or down that day. Simply looking at which sector is weak or strong will give you a starting point for each day’s trade.
4. Understand money flow
Sectors are strong or weak because of institutional rotation of money. You cannot fight the money flow you can only work with it. Most penny stocks will follow the broad pattern of their sectors but there will be a few outliers. It is always safer to trade within the broad pattern.
If you’re interested in making more money with low-risk investments whether you’re a seasoned trader, looking for additional income, or a starter, you can absolutely grow your income and improve gains by checking out Penny Stock Traders. It has resources that can dramatically increase your returns and reduce the risk of losing your cash. Penny Stock Traders.
By: James Morre
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