There are presently 1000’s of Penny Stocks available. But very few of them are genuine and capable of giving you good returns. However, smart traders have a few secrets up their sleeve for making consistent and regular returns from Penny Stocks. Here are their top 3 secrets!
#1 Diversification is NOT a must-have
When trading regular stocks, one of the key instruction that is regularly given is about the importance of diversification. It is always advised to divide your investment into multiple stocks.
However, in case of penny stocks, this advice doesn’t really hold true. Expert traders do not diversify their holdings in penny stocks. Instead, they focus on one or at most two Penny Stocks at a time. In fact, successful traders generally do not hold more than one stock at a time in their day-trading account.
So, why is it not advisable to diversify penny stocks? It is because diversifying a penny stock portfolio can be more complicated, expensive, and hurt your overall returns. For instance, the stocks which are your best ideas would be allocated at the same time, money, and effort as the stock which is a not-so-great-idea. If you had not diversified, it would have helped you gain more overall returns. The commissions and fees paid whenever you buy and sell penny stocks are also quite high. Selling and buying multiple penny stocks multiple times can rake up a good amount of money from your overall profits!
#2 Trade Your Style
According to expert traders, there are no hard and fast rules when trading penny stocks. Successful penny stock traders have been known to hold penny stocks based on their specific style of trading. Some hold it for 10 minutes, some for an hour, and some even for 6 months. They all have made money from penny stock trading, irrespective of the style of trading they followed!
This means that you do not need to mandatorily hold a penny stock for say, 1 month before you sell it off. You can sell the stock whenever the exit conditions of the trade are met. It is important to follow an accurate entry and exit in order to maximize profits and minimize losses. To know more about the entry criteria for buying the penny stock and exit criteria for selling the penny stock, you can check out our professional penny stock course.
#3 Knowledge Trumps Luck
Penny Stock traders who have been successful have one thing in common – they have spent time and effort to gain a very good knowledge of the stock market. This includes learning about technical analysis, chart patterns, fundamental analysis, candlestick patterns, overlays, indicators etc. Successful penny stock traders have admitted that they had started trading only after having a clear foundation of all these aspects of stock trading.
Expert traders first analyze the fundamentals of the stock, check the chart of the stock for upcoming price movements, figure out a clear entry and exit point, and have a stop loss for the trade before zeroing in on the trade.
Success in Penny Stock trading is more than luck – its hard work and knowledge!
Victor help individuals tap into the abundance of lifestyle freedom through Stocks, Options, and Penny Stock Trading. We provide educational training (only) to help increase profits by understanding the Fundamental and Technical Analysis of the Stock Market.