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Ep 94: Trading Penny Stocks – Theory, Advantages, & Risks

July 21st, 2016

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Hey, this is Sasha Evdakov and welcome to another episode of let’s talk stocks, in today’s episode, episode number 94, I’ll be talking about trading penny stocks in the stock market, we’ll talk about some of the theory, the advantages and some of the risks that go along with trading penny stocks.

We’ll spend about 30 to 40 minutes as usual on this lesson and I’ll try to condense and compress as much knowledge and information about penny stocks in that time frame that I have a load.

It’s not going to give you everything to trading penny stocks in the world, but it’ll definitely give you some insight to trading some of the smaller companies, the penny stocks, why I personally don’t trade penny stocks, why I prefer to trade other stocks, but I understand that there’s a demand for trading penny stocks, a demand for that interest, that information of how to trade penny stocks, at least from my perspective.

This video should give you some more of that insight, because for some people it’s a great way to do their trading, and for other people you might want to focus on other things, so whether you’re interested in trading penny stocks or not, this video should still give you some insight to the market as a whole and looking at some other factors when evaluating stocks and looking at stocks, trading stocks, getting in, getting out of positions, because the theory and the concepts are very similar, so I do want to spend a little more time on penny stocks specifically, simply because I don’t spend that much time on them, and I know that there’s demand for that information and this video should open up your eyes a little more to some of the lower priced stocks.

That’s what we’ll be talking about in this episode, episode number 94.

The current market

If you missed it this week, we did post a vide that’s about 20 minutes long for the critical charts members, so go ahead and take a look at that video, it’s on the website and it still does apply today, probably for the next couple of weeks, there‘s some good theories and concepts as well, relative to how the market is moving, acting and behaving.

For example, some of the stocks like Facebook over here, they try to get above it, and then they’re pulling back into these ranges, more so looking for earnings.
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The SPY or the SPX, is having one of the pullback days volume, is lowly starting to pick up, we’ll see if we get a continuation on Friday before the weekend, because sometimes you do, people get scared before the weekend and they’ll pull out their positions, so we’ll see how that works out.
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Because we did have a very long expensive streak, that’s really far away from that moving average, so time will tell if we do get that pull back, so just keep an eye on it, lightly but review that video in the critical charts to get more insight about the market as a whole.

Really we mention this last time, if you look at the Wilshire 5000, this is really the overall total market index, and you can see it’s coming up into the highs but rejecting it for the time being, could it break through? Absolutely.
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If you look at the IWM as well, it keeps trying to break through, and we may get it to break through if it continues knocking on that ceiling. So just stay nimble, and be patient, but you want to be cautious in case you get a major pull back, because it needs that digestion, the sideways digestion is necessary after having such an explosive run to the upside, it’s normal, it’s healthy for the market, the stocks to do that as a whole, it really comes down to earnings and fundamentals as well.
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Typically if our have great charts, you have great fundamentals, if you have great fundamentals, you have great charts, and that’s the way things work.

Penny stocks

Getting into today’s lesson, let’s take a look at some penny stocks, and I’ll just try and share as much detail as I can here, and the time that we have allowed and let’s just go into it.

When I look at penny stocks, there are a couple things that you can do to pull up some penny stocks. If you have index, the S&P 500 is not going to have a lot of penny stocks, so when you look at this and you start looking t price, in theory, what we define as a penny stock, in the past, it used to be stocks that were under a dollar, hence the name penny stock.
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But the definition slowly changed due to inflation and so forth, to stocks to $2 or $3, and then again the definition changed to stocks less than $5 and for me personally I define penny stocks really when I talk about them it’s just stocks that are in the lower 10% bracket in terms of price relative to the market.

So you could say about $8, $9, $10, $12, that to me is still considered kind of a penny stock or a cheaper stock, so the definition now does not really apply to just stocks under a dollar, it used to be that way in the early 1900s, but now a days the definition has changed to less that $5 is the technical definition. And with time, with inflation it will probably change to $7 or $10, so we will see as time goes on

When you look at the S&P 500, you’ll notice there’s not a company right here that’s really in the cheaper range with the exception of a few that trade around 4 or 5 dollars, so what you need to do is, when you look at the penny stocks, there’s a couple of things that you could look at, so you could look at, let’s say for example the NYSE so this would be the New York exchange.
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This would be a lot of different tickers, a lot of different stocks, so you could do that, and then when you filter by price, you can see here you have stocks $1 - $1.23 - $1.50, so this in total has 4718 stocks.

You could also, if you want to condense something, you could do the Russell 3000, which is about 2847 stocks, it’s going to give you a little bit of a smaller list, potentially a little more better balance sheets on this list, but you could still find stocks that are right there round, you know, $1, $2, $5, so as you scroll through the list, you’ll be able to see here that the stocks are at a cheaper rate.
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And then you also have an AMEX composite index, so this one also has quite a bit of stocks, it’s only 295 on this watch list, but it also has some additional stocks.
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Stay away from bulletin boards and pink sheets

Of course you could look at penny stocks that have bulletin boards, let me see if they have it NASDAQ right here. So yes, you could look at just the NASCAD as well, which has cheaper stocks.

Or you have these bulletin boards or pink sheets, now I definitely recommend you stay about from the bulletin boards and pink sheets, because they’re just traded very poorly and you’ll notice that with the charts.

A lot of these are just over the counter, you could see that the share price is all over the place, and these get manipulated very easily.
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I’d definitely say stay away from these kinds of things, because it will be very dangerous if the company falls and so on.

Just because a company is in the stock market, it doesn’t mean it can’t fail

Just because it trades on the stock market or because it appears bigger, doesn’t make the company valuable, doesn’t mean the company is making money, there’s a lot of companies, if you look at business as a whole, most businesses, 95% of businesses as a whole, fail within the first year.

After three years, about 98% of businesses fail within a few of those years. After about 10 years, about 99% of business fails, and that is just simply the nature of business.

The companies that you’re looking at right here, even though they’re on the stock market, that doesn’t mean they can’t fail. And there have been some major companies that failed even companies that were on the S&P 500, the NASDAQ and so on.

It’s important you be disciplined to be aware that just because they’re listed here, doesn’t mean it’s going to work out properly.

The natural thing for a big company

The natural thing for many companies to do, if we look at the S&P 500 in general, the natural thing for most companies to do, especially if we look at larger companies, like let’s say a Google, an Amazon, their normal tendency, the natural thing for them to do, what happens in the future is that they naturally gravitate towards growing.

Eventually they get too big and then the growth slows down, but the natural thing for them to do is to grow in the future, as a company, they expand their warehouses, their buildings, they acquire companies, that’s the natural thing to do.
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As you continue to grow a company, you’ll see explosive growth, similar to how Tesla here, which is fairly new, you have that explosive growth, you have the building phase, you have the growth phase, now you have kind of a stabilization phase, and then you might see another growth phase, or you could see a pullback phase, it just depends.
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But really the natural tendency for most companies, especially if they’re stable companies is to grow in the future, just like Fedex.

If you look at the long term history of that company, the natural thing for it to do is to grow, from the 90s all the way into the 2000s, it has a little pull back, and then again you have that next growth phase. So the natural thing for them to do is to grow.
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The natural thing for penny stocks

For penny stocks, it’s actually the opposite, it’s a little backwards, even though you may say, well, for many companies they are there for growth, but if you look at penny stocks and we look at the NASDAQ, and we start looking at companies that are priced at let’s say 39 cents, the natural tendency for these companies is not to grow.

The business owner of course wants that company to grow, because they will make money, but that’s not the way penny stocks work out, because think of the 90/10 or 80/20principle.
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If you go into a grocery store, where is the healthiest food in that 20% of the grocery store? It’s in that healthy food section, in the vegetables, the fruits, that are where you want to stay and hang around?

People trade the top 20%

Most people who are investing, who are trading stocks, they’re sticking to the top 20% of the companies that are traded.

They’re not sticking to all these 3000 companies; they’re sticking to the top 500 companies, top 200, and top 20 companies. For me, just trading 5-7 companies at most is really all you need.

But here, if you look at it, initially you’ll get this search and then the natural tendency for this company over time, in general, if you look through many penny stocks, most of them will sell off. They might get a few pops here and there, but the natural movement, most of the time, they’re there to sell.
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The way I look at it is, if you’re not comfortable with shorting, you’re going to have a struggle with penny stocks, because most of the times they should be shorted.

Of course there are opportunities where they should be bought, like this, during this movement to the upside, and then you have to take some profits, but then most of the time they are there to be shorted.

Penny stocks get easily manipulated

As you go through other companies, if you look at some of these other companies, you’ll notice the trading look is a little weird, sometimes the trades aren’t being executed very well.

Other times they are stagnate, the price gets manipulated, and that is simply because it doesn’t take a lot of money to move these stocks. So there’s a lot more manipulation that happens.
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If I take this out to the weekly, you can see the manipulation that happens, this is all manipulation, buyers and low volume and low liquidity, one of the reasons why I don’t trade it

Once you get into this, and if you’re stuck at $1.11 - $1.12 and it just stays under there, you could be stuck for years, especially if you have money tied in there, you’re better off to just take your money, sell and get out of your profits.
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Here’s another reason why I personally don’t trade these stocks and companies, there are ways that you could trade them, which I’ll talk about here shortly.

The thing is, there’s not enough liquidity, as you trade, penny stocks are a great way for people to think and have the hope, have the dream and vision to making it big and rich.

If we look at, let’s us find a company, let’s say you’re getting into this company right here at $1.82 a share, and this company explodes to $5, if we take a calculator. You’re in at $1.86 and you’re at $5, let’s just say it’s a $3 gain for you.
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With a $3 gain, what you can do is, if you got a $3 gain and you bought, let’s say 30000 shares, 30,000 dollars. $3 dollar gain, you’re tripling your money, pretty much you’re at $90000.

For many people that’s amazing, they look at that return and it’s remarkable, because of those spikes that you can get, they look at that and they get attracted to them, due to the hope, the greed, and just the potential to make it big.

But remember what I said about the natural tendencies, and the natural energy of penny stock, most of them will sell off.
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Look for specific movements in penny stocks

So yes, you do have these initial pops in stocks that they may pop $3-$4, but then the majority of the time they’re selling. So you’re looking for specific movements in these companies, and this is how you trade them. For specific movements of overbought, oversold, and then you trade them accordingly.

When looking at these, and you start scanning these, you’ll notice that some of them are just traded very poorly and thinly, and this is in part due to what happens when you have a thinly traded stock, you get manipulation, and that’s why you get prices that shift around all over the place.

For example, if you look at this company right here, which is 52 cents. 52 cents in a normal trade is about 83000 shares, on average let’s just say 90000 shares, so today it was 83000.

Let’s say, if I wanted to buy this stock, or even manipulate this stock, it doesn’t take a lot of capital, and it’s one of the reasons why hedge funds also cannot trade this.
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Here, looking at it, if I did, let’s say 150 thousand shares, and bought it a let’s say 53 cents, it would only cost me about $80000, and I could do the whole purchase of that stock for the day with $80000, which would probably pop it to about 83 cents. It would move that stock.

That might sound great, but then how do you get out of it? Because one you start dumping, more people are going to dump, because remember there’s other people at higher levels.

With hedge funds that are managing major money, as your account grows, you’re going to have more difficulty buying stocks, shares, getting in and out of positions, that’s just the problem with trading these cheaper stocks, especially here at the 50 cents – 80 cents, they can be manipulated

And you might see some spikes to the upside, only to suck you in, and then it’ll roll back over a lot lower.

Let’s recap

To recap and summarize, the natural tendencies for large stocks, like, let’s say an apple, even though an apple has been going down lately, the normal tendency or it is to grow as a company, just like visa, MasterCard, naturally they are there for growth.
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For penny stocks, as you look at these penny stocks, their natural tendencies are to actually sell off, and get manipulated, that’s the nature of that business, so they may pop, but then they get sold off, they may pop, they get sold off.
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This is just the way it works in the markets with penny stocks, most of them are there to be sold, not to be bought or invested in.

Can you trade penny stocks? Is it worth it?

The main question comes down to is, can you trade them? And yes, absolutely you can trade them, if you have a smaller account, if you’re looking to trade in a smaller account, you can trade penny stocks.

But is it more worthwhile or advantageous to trade a penny stock versus a larger stock?

They appeal initially as always the pops, they appeal as usually the popping action that you get with these kinds of stocks, which is due to in part the manipulation, but you can still trade them but is it worth it? Is it worth trading them?

Because when you trade stocks like a Google, even though you might only be able to buy, let’s say 5 or 10 shares.

Let’s say you have a $30000 account. So let’s do a little calculation. If I have a $30000 account, and the stock is $600, I might only be able to get 50 shares, and in those 50 shares, if that stock runs up, that stock is running up like a Google might run up 140-130 points.
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130 points, times 50 shares, you’re getting $6500, so that seems pretty good, but if you look at a penny stock, let’s just say again, we have $30000 divided by, let’s say $2 penny stock, 15000 shares, so let’s say you get 10000 shares and it moves up on you about $2.

There, you’re making $20000, that seems much more attractive than maybe $6500, because it’s much more money, it’s twice the money.

Be aware of the risk to reward

However, keep in mind, what is the natural tendency of the stock for a penny stock? It’s for it to go down and sometimes you get stuck, sometimes it’s manipulated, and not all the time does it work out.

The risk to reward is much more so as you start adding things in, and the movement on a day to day basis is different.

As you do more and more calculations, you’ll be able to see that the differences are actually much more minimal, because for me at night, holding a penny stock, rather than holding something like a Google, or a visa or a MasterCard, I much more favor holding and sleeping better at holding a stable company.

If you’re trading penny stocks, it’s more for people who are really active in the market I would say, or people who are really focused at the computer and are able to get in and out of trades within a few days.

How I would trade penny stocks

This is the way that I would trade them, if you’re attracted to penny stocks. The way that I would trade it is, I would look for a stock that’s maybe trades a little bit more shares, so here you could see this one trades 10 thousand shares or 39 thousand shares, the volume, you’re looking at the value.

You’re looking for something that has a little more volume, a little average volume but not too high. And you’re looking for again, a pattern, so no as you get into these volume areas that look ok, for example look at this stock, they continue to split it to try to pop that stock higher.
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As you look through this, you’re looking for volume that’s popping. So here, this would be a good example, so this stock continues to move lower, it’s going down, and now as you see that volume picking up, you would have to get into that stock right away, right when it breaks that level.
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It’s got a few evils, it’s breaking at $1.75 - $1.65, and you start getting into that stock. And then, within one or two days, as it pops, because it went from $1.20 or so, it pops and explodes and you get out, you get out at $8 - $9 - $5 , because it went 4, 5, 7 times its value, you already start selling.
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You get in it right away and then you start selling, because the problem with this is, if you get into these stocks, and you’re thinking it’s going to go higher like an investment. Let’s just say you got in it in 2012, you could be holding that stock for 4 – 5 years until that pop comes.
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It’s all about volume

In these companies you’re more so waiting for that break or that pop, and this is what happened, you got this descending trend line, boom, volume picks up right there, you see that volume spike, relative and comparing it to the previous volume, so you can see the previous volume was kind of around 200 thousand, and then when we came in, volume all of a sudden started to explode.
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If you got 150% of the normal daily volume, that’s a good thing, it’s about value, just like with the big stocks, with the big stocks it’s a little more difficult to see, but with these stocks, you can see them quite easily because they don’t trade that heavy.

And now as we get more trading coming in, boom, we explode to the upside and this stock right now VLTC exploited from April, for just a couple of days, about two weeks to the upside, and we hit our all times highs, was really 20. But then we pull back, and we closed out around $11.

And now, look at what’s happening to the stock, what is the natural tendency? The natural energy is for it to go back lower, and where is it? Back down and the $3 level.
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Get in and out quickly on the breaks

Yes, it’s a little higher than it was before, but this is how money is made and how money is made in the markets with these penny stocks and this is the way you do it; you get in it right away on the break with these penny stocks.

Then right away, once it starts going one or two days later, if we look at the daily, let’s see how the daily action panned out here, you can see you got in on the break, stock continued, maybe you add a little bit, you add a little more, volume still strong, then one you see the volume rolling over, you’re out.
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That’s it. No ifs, ands or buts, because look at what happens later, that stock continues to move lower. And this is how you have to trade penny stocks, they’re quick, they’re in for a week or two, sometimes you’re waiting on those positions or breaks, or you’re waiting for alerts that you setup in place. And once those volume alerts or the trend line alerts break, you’re in, you can’t hesitate, and then you’re already starting to peel and get out of those and that’s it, you’re done. It’s not like trading bigger companies when you can hold them and they’re normally going to grow.

Because these things what happens is a wave of people, you have manipulators, you have day traders, you have speculators, they get in it, and then they’re trying already to make their money and then they get out, and most of the people they’re losing out, because they’re not selling.

Let’s say you get in right here with 1000 shares, then you start to peel of 100 shares, another 100 shares, another 100 shares.
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If a stock that goes from a $2, gets into a $15, I would take my money, I would take my money and run, because that’s such an extension.

And if you look at the Bollinger band here, look at how extended that is, Bollinger bands just tells you price, realism and containment, standard deviation movements on a statistic level.
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Look at how far extended we are on that. Most of the time prices will be contained, but if it breaks out there, especially at that level, probably for me I wouldn’t have made that much money on this one, or just gotten out of it probably on the $4 range.

Account size and penny stocks

But I don’t trade these, because once you get larger, you do this when your account is small, if you’re trading penny stocks; you’re doing this when your account is small.

Normally once your account starts growing, $200000, $500000, a million, 2 million, 5 million, 10 million dollar account.

Once your account starts growing, you can’t trade these stocks. Because the problem is that if you look at this and you have 142 thousand shares traded on a daily basis.

Let’s just say if I traded, let’s say a 2 million dollar account here. So here, and we divide that by 4. I’m buying 500 thousand shares. And this one only traded 142000, so it would be very difficult for me to get out and scale out of that position once I’m in. Because that would run the stock price up, because I’m buying 5 times the daily, and then eventually I have to get out and dump it.
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It’s a risky business once your account grows. So normally as a larger trader, bigger portfolio account, you want to stick to more popular companies, you start getting into other companies that are a little more stable, a little more popular, and that is because you can also make much more money and have a better peace of mind.

Reasons to trade penny stocks

But if you’re looking to ride penny stocks, this is the way you do it. You do it because you, number one, like the day trading, or like the speculation, or you’re looking to build your account and this is the way to do it.

Maybe you like the penny stock trading because there’s not a lot of experts in there, because a lot of people who trade penny stocks, they might be the stay at home people or the people that are working, but they’re trying to gamble things and you capitalize on that.

When you have support and resistance line like this, and then eventually it breaks out of that and you see that volume right there starts picking up, you know you get in it, you’re in it for a couple of days, maybe a couple of weeks and then you start getting out of it, because from a $2 to a $3.50 run, that’s it, you’re holding to that stock.
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Let’s say you’re in about 5000 shares, and you peal about $1.50 off, so you make about $7500 on that trade.

Opportunities are limited

This is the thing with penny stocks, is that you’re typically in and out quick, but most of the time, if you look at it, the opportunities are kind of limited, so here for example you had a little opportunity, you had these descending patterns, the break, another sideways, another pope, and then again, most of the time they’ll sell off.
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If you start looking for them, you slowly start scanning things; you’ll see that sometimes the charts are not very clean, if the charts aren’t clean, just move on, click the next button.

But in general, selling off, they’ll climb, sell off. The same thing here, you get a little pop, and then what do they do? Most of the time they sell off.
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Here’s one that kind of worked out, this is a little more pricey stock, but you can see it’s around $8, cheaper stock, and then there was your break out.

If we zoom a little closer, you can see what happened, the strategy was the same. The same as many other stocks, so here’s your support and resistance line, you get in it right around $9.30 price level.

As you get into this resistance, we break it, you can even see it coming into this and breaking that, coming in with a lot of energy, as we break right there, you start pealing shares off, and you start pealing it after you see the volume get weaker.
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Once this volume starts weakening, again, you’re pealing already right here, you’re taking shares off, because chances are, a $9 stock, all the way to about $15, you’re almost doubled, more than likely it’s going to come back.

Be real, this is about realism, and what does it do? It comes back, and it even goes lower, it’s just hype.
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This is what penny stock trading is about, it’s about the hype, the manipulation, and now some of these people now are losing money and then other short sellers got in, this is the way it works.

Most times it’s better to short penny stocks

You can make money to the upside, or the downside, sometimes it’s difficult to borrow shares when it comes to penny stocks, and that is simply because the amount of shares that’s available it’s limited, so that’s why it’s good to have multiple brokers sometimes.

But in general, most of these would be better off shorting rather than buying, if you can borrow the shares.

It can whip you around, of course, if you get a spike to the upside and you short holding it for a long time, but again, the same thing, you don’t want to hold these things, it’s like dead fish, you don’t want to hold on to those things for weeks at a time, because that’s not what they usually, normally do.

Summary

Let me give you a final summary. If you’re looking to trade penny stocks, the difference in profit potential versus a larger stock is minimal, there is some, you can potentially make a little more in penny stocks, just because of the explosive runs percentage gains that they’ll have, and sometimes they get that manipulation factor happening, but it’s a little more difficult.

The natural tendency for penny stocks is to go lower. The natural tendencies or energies for many other stocks are for them to grow as a company.

With the stocks, if you’re trading penny stocks, many of them are manipulated, and many of them trade light volume. When you have light volume trading, then you get more manipulation and it whips that stock around.

As your portfolio grows, it’s difficult to trade on a lighter volume stock, because you want to hide and camouflage your position, so it’s better to trade the larger stocks.

Can you still trade the smaller penny stocks if you have a larger portfolio? You can, you just probably wouldn’t trade it all at once, and you probably have to break it apart into multiple days.

Do you want to trade big or small?

For me personally, as you look at explosive runs like Priceline, when you start looking at things like this. When you get into stocks that are trading and you have a larger account and you look for break outs here, you have a 5, 10, 20 million dollar account and you get into this right here, the explosive run to the upside is 500 points.
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Do you want to deal and play with the 500 hundred point runs, or do you want to try and scalp for 20 cents, a dollar, 2 dollars? Because you’re waiting for those runs and you have larger stocks to choose from, more stable companies to choose from if you’re trading the more stable companies.

It depends on your personality

Again, it depends on your personal preference, if your character as a person is more gravitated towards penny stocks, there’s absolutely nothing wrong with trading penny stocks for the rest of your life, it just takes a certain different kind of personality

But unfortunately, as your account grows and as your portfolio grows, you probably want to gravitate towards other areas, and not to mention, it’s just also the quality of life of trading, would you rather put on a trade, let it sit and not worry about it, and maybe make a little bit less on it. But still make some decent money?

Or do you want to worry about your stock? And with trading larger stocks, I find, or even indexes, my mind is more at peace, which allows me to do other things with my spare time, such as writing books, because I can put on a trade and then let it sit for a week, a month, and not stress about it, not worry about it.

Whereas if you’re the one that’s trading a penny stock, for me, personally, that’s just my personal characteristics, maybe it’s not for you, its’ a little bit more difficult to sleep at night if I’m holding 20, 40, 50 thousand shares of a penny stocks.

That’s why I don’t do that, it’s a little more nerve racking, because it can be manipulated, they can hold the trading, it can get delisted, there’s a lot more risk that’s involved in that. And I don’t want to risk my money for those kinds of things.

Can you have success with penny stocks?

But if you’re asking, can you still trade penny stocks? Can you make money with penny stocks? Absolutely, you can even make much more money with penny’s stocks, especially if you catch them at the right time, looking for proper set ups, but sometimes this takes experience, a lot of practice, looking at the charts, looking at swing points, and as you find nice charts and setups, and you catch these explosive runs to the upside, you’re already pealing things off right away.
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You get that explosive run and then boom, it’ll come back down, and that’s what they do, they get that moment, their 5 minutes, 10 minutes, 15 minutes of fame, and then they’re back down. For stocks it’ll be more like a couple of days of fame and then they’ll come back.

That’s my take on penny stocks, at least in the time that we have allowed, I hope you enjoyed this lesson, and even if you don’t trade penny stocks, I hope you got some good insight for trading in the market for this lesson.

It all comes down to energy

Because it really all comes down to energy, the natural energy of the market, where is the supply and demand? Who’s in control? This is all part of energy, what’s the natural tendency of a certain type of stock.

If it’s a cheaper stock most of them are going to sell off, if it’s a company that’s looking to grow and constantly evolve, then they’ll look to expand in the future.

That’s the thing that naturally happens, and it happens to everything in this world, it happens all around this world.

If you buy a car, the natural normal thing for it to do is to depreciate in value and to rust, to get older, to need repairs, that’s just the normal thing that happens when you buy a car, a vehicle.

That’s the same thing with stocks. Looking at certain types of stocks, that’s what they do, some sell off, that’s their normal tendencies, some pop higher, some move stable, there’s different areas and look at it, how they behave in that sector, that area, the type of stock that it is.

And if you understand how that type of stock is behaving, acting, moving, then you’ll get the energy. You’ll understand what its natural tendencies are.

I hope that gave you some insight to trading some penny stocks in the market, what to look for if you’re looking to trade penny stocks, normally, like I said, if you’re getting started with penny stocks, but just keep in mind that a lot of these things are manipulated when it comes to lower price stocks.

It’s not that you can’t’ trade them, you just need to be careful, they’re more quick, in for a few days, and then you’re out.

You’re looking for charts where you get that pop, and you get that lite pop, you’re in it, you’re in it for a little bit of the gain, and the you’re out, you’re scalping, you’re nibbling off of those trades.

Keep it simple

Again, you just start scanning, looking for simple patterns, don’t make the patterns too complicated, just simple support and resistance with penny stocks is all you want.

And you’re in it, and then you’re out, that’s it, very simple, look for a little bit of extra volume coming in, and a little bit of volume in that stock on a trade, because you want to also be able to get out of that trade.

Don’t trade too much on penny stocks right away, because if you do, it might be difficult getting out of that position.

Just keep on watching for simple support, resistance, that’s about the way that I would trade it, because the more complicated you make it, the more confusing your strategy will get.
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Here, looking for support, resistance, get into hat stock, ride it for a couple of days or a couple of weeks at most, start getting out of it, already pealing your profits off, and then boom, those stocks roll back over, and sometimes they get lower than what they normally were at that break out.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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