Penny stock is a tricky game filled with lies and cheaters and thieves. Most stocks don't remain the same for more than two year. Either the name gets changed, or undergoes a reverse split, or the management changes. For this reason, one should not be a long term player. No matter how good a stock appears to be one should never bet the ranch but only make small investment in these stocks. But apart from its risks, nowhere will you find stocks that move as quickly as it can in this market. And there lies the chance to earn big profits.
Always use limit orders. Pick an entry price and stick with it. Never chase stock. And never use market orders to enter into a trade. Market order enables the market maker to fill you at any price they prefer and leaves you vulnerable to getting poor fills.
If a stock gaps way up don't chase it. It is bound to come down during the day. Opening is also a very crucial part. It can help you predict the way stocks are going to behave that day.
Keep the losses small. One must have a fair idea of the risk one is willing to make. One technique is to sell a stock if it goes below the price in your alert. Remember big loss has its beginning in the small loses. Always be in control of your emotion and get out f the trade goes against you. The success to trading is to know how to limit losses. An order called Stop Loss Order limits one's loss or protects one's profit on a trade. If one is trading in penny stocks then Stop Loss Order is a must. The most suitable place to put one's stop is slightly below the previous day's close.
Always sell on the way up. Get used to booking profits no matter how small. it doesn't matter whether the profits are big or small, but one should always try and have consistent profit instead of risking for a big home run. And last but not the least, always use trailing stops to protect one's profit after a stock has gone higher.
