How Can You Make Money Trading Penny Stocks?

How Can You Make Money
Trading Penny Stocks?
By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/how-can-you-make-money-trading-penny-stocks
If you are going to trade stocks, trade
what you know.

That means if you have specific
knowledge regarding a specific stock
sector stick with that.

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If you are really good at technical
analysis algorithms use those.

If you want to make a killing in the
market pick a cheap stock with
promise and sell when it goes up a
hundred fold.

All of this sounds good but specifically
how can you make money trading
penny stocks?

There are three viable approaches.
Knowing what no one else knows
about a stock, exceptional technical
trading skills and buying a large
number of cheap stocks are three
ways to go.

Pay Attention to Stocks
that Analysts Don’t Know
About

Years ago a friend of this writer
worked for DaMark.

This company sold high end
electronics via a catalog and mostly
took orders by phone.

They did well until one of the
founding partners took his money and
left.

The other did not do so well and the
stock tanked.

While no analysts were watching the
remaining partner got some solid
advice and revamped his business.

The friend in question was a trainer
for new employees who needed
computer skills to process orders and
she was exceptionally busy getting
ready for the holidays.

The company had a banner 4th
quarter and the stock rose five fold.

Anyone with knowledge of the
prospective turn around made money
on this penny stock while the Wall
Street analysts were sleeping.

History Repeats Itself

Back in the days of the samurai in
Japan rice traders recognized that
certain price patterns repeated
themselves.

If the trader recognized the first part
of the pattern he could buy or sell to
make a profit as the remainder of the
pattern unfolded.

The still-used Japanese Candlestick
technical analysis signals evolved
from this era and are still used today
in trading.

Whether you use this time honored
approach or a newer means of
statistical analysis, day
traders follow stocks or indexes and
make steady profits on the normal
volatility of the markets.

Purely technical traders believe that
the market quickly internalizes all
new info so that analyzing
fundamentals is of little use but quick
and accurate response to trading
signals is profitable.

The Random Walk Down
Wall Street

As the story goes, years ago a bunch of
business writers at the wall street
journal hung the NYSE stock page on
a cork board.

Then they threw darts at it to pick
stocks.

The writers kept track of their random
picks and found out that over time the
randomly chosen stocks did better
than the S&P 500 and much better
than many managed funds.

The book a random walk down wall
street was the eventual product of this
experiment.

The rationale is that the stock market
prices stocks are accurate according to
available information.

Thus there is no room for trying to
outguess the market.

A subsequent publication, the
random walk revisited, noted that
investors are willing to accept a lower
rate of return for secure blue chip
stocks and want a higher rate of
return for more risky penny stocks.

Thus the average rate of return on
penny stocks is higher that blue chips
over time.

The problem when picking one penny
stock is that it might fail which is why
the market has priced it where it is.

The writers said that if you pick 40
penny stocks that is enough to
average out the losers whereas you
only need 10 blue chips.

Over time you can make money with
penny stocks because they are priced
cheap and have better growth
prospects as a group than blue chips.

How Can You Make Money Trading Penny Stocks?

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How Can You Make Money Trading Penny Stocks?