Trading Startegy For Making Profit With Penny Stocks

There are two types of people in stock market

, one is known as investor and other is traders. Both look for profitable investment opportunities in the market. And the strategies for investors and traders are different.

To select proper investment / trading strategy or system, one should know that is he or she investor or trader? Investor who has long term perspective or trader who has short term perspective

Analysis or research is very important when you invest or trade. Fundamental analysis is helpful for those who are investors and look for long term gains and other hand those who look for short term gains should opt technical analysis.

Also there are many types of stocks available in the market such as penny stocks. These are though very risky but if you trade penny stocks with sound knowledge of technical analysis you can make big money in less money.

If you want to make money with penny stocks you need to find a penny stock company that has good prospects in near future. Use technical analysis for good entry and exit points and trade according to it. Technical analysis will help you to find good entry exit points.

Though technical analysis is complicated but very helpful to find profitable opportunities for short term. It needs time to learn, before investing in any stock devote little time to learn it and make a simple but effective trading system. Initially do paper trading only and find whether it works on not.

Good entry and exit points are essential for successful trading, though it is not all you need to use other techniques too such as stop loss technique and money management technique. By using these technique with a trading system that has good success rate say seventy per cent success rate will improve your chances to make profit.

If you make your trading strategy that has acceptable success rate and use other trading techniques i.e. stop loss and money management, you will make money in the stock market, Yes even in penny stocks.

The percentage gain in penny stock is mind boggling. To explain it here is an example. Say you invest in stock ABC that is trading at $2 and you purchase 100 shares, your investment becomes $200. Now if the stock rises to $3 then your investment becomes worth $300 an profit $100 (i.e. $300 -$200). In other hand say you found good penny stock companies having good future prospects, trading at say $0.20 (twenty cents). Now if the penny stock rises by $1 same as previous one, your gain will be $0.80 (Eighty Cents). If you had invested the same amount of shares i.e 100 shares then your investment would be for that penny stock $0.20 X 100 = $20 . So your gain is $80 on Investment of $20 and percentage gain is 300% ! That is why people love to invest in penny stocks.

by: kinnari patel

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