Day Trading Penny Stocks: What You Need To Know Before You Invest

Let’s start by talking about what a day trader actually is. Basically it’s someone who buys and sells stocks quickly. In fact, the quicker the better if you’re a day trader. By doing research on the TV business news, newspapers, internet, and many other places, they find the stocks they want to invest in. They buy a ton of shares quickly and watch for even minimal gains. If they do it right, they get out whenever there’s a gain which nets them a profit that depends on the number of shares they traded.

Knowing what a penny stock is won’t hurt, either. Although it sounds like it should be a stock that sells for a penny a share, that’s not exactly accurate.  Penny stocks are those that sell for under five dollars a share.

The trading in penny stocks has sky-rocketed during the last decade and a half. The day trade bible, the Over-the-Counter Bulletin Board (OTCBB) traded just over 3 billion shares in 1994. That was about 4.5% of the number of stocks traded on NASDAQ and the NYSE.  By 2003, though, the OTCBB numbers had gone up a total of 8900%.  In less than a decade their volume had increased to 267.4 billion shares. That was an increase that amounted to 63% when compared to NASDAQ and 78% of the NYSE. Can you believe it?

Rules the Experts Live By

Experts in the field of day trading penny stocks have put together a list of 50 of the best rules for day traders that were popular sometime during the 20th century and still retain their value today. The following list only includes ten of their rules in the interest of the length of the article, but they will be enough to give you some ideas.

1. Have a trading plan and stick to it.
2. Only reinvest half of the profits you make; save the rest.
3. Plan time to study the market, and stick to it.
4. Develop more patience, perseverance, determination, and rational action in order to succeed.
5. Losses teach. Take advantage of yours to learn more about the market.
6. Get out of a trade if it drops 20% from your peak profit point.
7. Achieve more by continually setting your goals higher.
8. Stay positive, no matter what the loss.
9. Be willing to buy high and sell low if necessary.
10. Believe in you!  It takes confidence to win in the day trading game.

Day trading is a risky venture, and penny stocks make it even more so. If you think you’re up to the challenge, you might give day trading penny stocks a try. If it doesn’t work out, you can always cut your losses and get out. You may just find that you have a knack for it, though, which could end up netting you some big profits.