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Penny stocks can be a highly affordable and profitable way of getting into the stock market if you do it right; and can lay the foundations for a good second income to supplement your monthly paycheck. But as with many aspects of the stock market, timing can be everything. Get it right and youe in clover. Get it wrong and all your hard work may be in vain.
Penny stocks are, by their very nature, prone to swings with prices making large movements both up and down, often in a very short space of time. All of your penny stocks buying and selling should, of course, be based on sound research both of the market and the companies?recent history. How the company is doing in terms of profitability, whether they are just about to, or have just announced profits, losses or new patents, discoveries and products, can all affect your decision on whether, or not, to buy.
Knowing the right time to sell your penny stocks however can sometimes seem, as much an art as a science, although getting it wrong can be fatal. Many people seem to put all their research efforts into knowing what penny stocks to buy and when to buy them.
Often the decision to sell is arrived at in a much more arbitrary fashion. This usually falls into one of two categories.
For instance when the penny stocks start to show a profit they sell immediately and take the cash in case it drops again. If there is no great forethought or indeed research as to if the upward trend is likely to continue how do they know if they have made all the profit possible. If they get it wrong and sell say when a lightly traded $.50 share moves to $.70, they very often do so without any research into the reason for the sudden 40% increase in value.
If for instance small software company that is being traded as penny stocks announces a revolutionary new product and their value suddenly jumps. It may increase even more if after the mainstream software industry investors have digested the news they have found no obvious competitors. And if they believe the company is about to get a huge windfall in sales. In this scenario you could be making a small profit on your penny stocks instead of a substantial one. Making a profit is always good but you need to be sure you have made the most of it.
Then there is the other end of the scale, when a trader holds on to his penny stocks for to long and loses the profit when the shares peak and start to lose value. This is usually for one of two reasons.
1. That the trader is playing an endgame where he believes that if he just holds on a bit longer then the penny stocks are bound to rise a little more.
2. He has bought some penny stocks that either are rising or he believes will rise, and then doesn check to see what is happening. It is very easy to get distracted if there has been no great movement and to assume that it will stay like that, or simply to forget to check back for a few days.
There is if you go about it the proper way, a great deal of profit to be had from trading in penny stocks. But you have to know not only what to buy but also how long to keep it and when is the best time to sell. The answer, as with most things in the world of finance, is good information and research. But that doesn end when you buy. Find out why your penny stocks are rising and this will put you in a much better position to know when to sell.
Penny stocks are, by their very nature, prone to swings with prices making large movements both up and down, often in a very short space of time. All of your penny stocks buying and selling should, of course, be based on sound research both of the market and the companies?recent history. How the company is doing in terms of profitability, whether they are just about to, or have just announced profits, losses or new patents, discoveries and products, can all affect your decision on whether, or not, to buy.
Knowing the right time to sell your penny stocks however can sometimes seem, as much an art as a science, although getting it wrong can be fatal. Many people seem to put all their research efforts into knowing what penny stocks to buy and when to buy them.
Often the decision to sell is arrived at in a much more arbitrary fashion. This usually falls into one of two categories.
For instance when the penny stocks start to show a profit they sell immediately and take the cash in case it drops again. If there is no great forethought or indeed research as to if the upward trend is likely to continue how do they know if they have made all the profit possible. If they get it wrong and sell say when a lightly traded $.50 share moves to $.70, they very often do so without any research into the reason for the sudden 40% increase in value.
If for instance small software company that is being traded as penny stocks announces a revolutionary new product and their value suddenly jumps. It may increase even more if after the mainstream software industry investors have digested the news they have found no obvious competitors. And if they believe the company is about to get a huge windfall in sales. In this scenario you could be making a small profit on your penny stocks instead of a substantial one. Making a profit is always good but you need to be sure you have made the most of it.
Then there is the other end of the scale, when a trader holds on to his penny stocks for to long and loses the profit when the shares peak and start to lose value. This is usually for one of two reasons.
1. That the trader is playing an endgame where he believes that if he just holds on a bit longer then the penny stocks are bound to rise a little more.
2. He has bought some penny stocks that either are rising or he believes will rise, and then doesn check to see what is happening. It is very easy to get distracted if there has been no great movement and to assume that it will stay like that, or simply to forget to check back for a few days.
There is if you go about it the proper way, a great deal of profit to be had from trading in penny stocks. But you have to know not only what to buy but also how long to keep it and when is the best time to sell. The answer, as with most things in the world of finance, is good information and research. But that doesn end when you buy. Find out why your penny stocks are rising and this will put you in a much better position to know when to sell.
Penny Stock Guide
PR
1. After a new stock purchase, draw a red defensive sell line on a daily or weekly graph at the precise price level where you will sell and cut your loss. In the first 1 to 2 years of a new bull market, you may want to give stocks this much room on the downside and hold until the price touches the sell line before taking defensive action.
The defensive, loss-cutting sell line may in some instances be raised but kept below the low of the first normal correction after your initial purchase. If you raise your sell point, don't move it up too close to the current price, because any normal little weakness will shake you out of your stock. If your stock increases 15% or more after a correct purchase, move the defensive sell line up to less than 5% below the pivot purchase price.
2. Your objective is to buy the best stock with the best earnings at exactly the right time and have the patience to hold it until you have been proven right or wrong. You should give securities 13 weeks after your first purchase week before you conclude that a stock that hasn't moved is a dull, faulty selection. This, of course, applies only if the stock did not reach your defensive sell price first.
3. Any stock that rises close to 20% should never be allowed to drop back into the loss column. For example, if you buy a stock at $50 and it shoots up to $60 (+20%) and you don't take the profit when you have it, there is no intelligent reason to ever let it drop all the way back to $50 or below and create a loss. You may feel embarrassed, ridiculous, and not too bright buying at $50, watching it hit $60, and then selling at $50 to $51, but you've already made the mistake of not taking your profit. Avoid making a second mistake and letting it develop into a loss.
4. Always pay attention to the general market. If you Initiate new purchases when the market averages are topping and beginning to reverse direction, you will likely have trouble holding the stocks bought.
5. Major advances require time to complete. Don't take profits during the first eight weeks of a move unless the stock gets into serious trouble or is having a two or three-week "climax" rapid run-up on a stock split. Stocks that show a 20% profit in less than eight weeks should be held through the eight weeks unless they are of poor quality without institutional sponsorship or strong group action.
6. If you own a dynamic leader or a stock belonging to a leading group, you may want to hold it at least until its weekly close is below its 10-week moving-average price line on increased volume. Some outstanding leaders go an amazing distance before this occurs.
7. If possible, try to hold through the stock's first short-term correction once you already have a profit.
8. Holding for a long-term gain during the early stage of a new bull market, in many cases, may force you to stick to your position long enough to make a big gain. Remember, the object is not to be right, but to make big money when you are right.
The defensive, loss-cutting sell line may in some instances be raised but kept below the low of the first normal correction after your initial purchase. If you raise your sell point, don't move it up too close to the current price, because any normal little weakness will shake you out of your stock. If your stock increases 15% or more after a correct purchase, move the defensive sell line up to less than 5% below the pivot purchase price.
2. Your objective is to buy the best stock with the best earnings at exactly the right time and have the patience to hold it until you have been proven right or wrong. You should give securities 13 weeks after your first purchase week before you conclude that a stock that hasn't moved is a dull, faulty selection. This, of course, applies only if the stock did not reach your defensive sell price first.
3. Any stock that rises close to 20% should never be allowed to drop back into the loss column. For example, if you buy a stock at $50 and it shoots up to $60 (+20%) and you don't take the profit when you have it, there is no intelligent reason to ever let it drop all the way back to $50 or below and create a loss. You may feel embarrassed, ridiculous, and not too bright buying at $50, watching it hit $60, and then selling at $50 to $51, but you've already made the mistake of not taking your profit. Avoid making a second mistake and letting it develop into a loss.
4. Always pay attention to the general market. If you Initiate new purchases when the market averages are topping and beginning to reverse direction, you will likely have trouble holding the stocks bought.
5. Major advances require time to complete. Don't take profits during the first eight weeks of a move unless the stock gets into serious trouble or is having a two or three-week "climax" rapid run-up on a stock split. Stocks that show a 20% profit in less than eight weeks should be held through the eight weeks unless they are of poor quality without institutional sponsorship or strong group action.
6. If you own a dynamic leader or a stock belonging to a leading group, you may want to hold it at least until its weekly close is below its 10-week moving-average price line on increased volume. Some outstanding leaders go an amazing distance before this occurs.
7. If possible, try to hold through the stock's first short-term correction once you already have a profit.
8. Holding for a long-term gain during the early stage of a new bull market, in many cases, may force you to stick to your position long enough to make a big gain. Remember, the object is not to be right, but to make big money when you are right.