How to Buy Penny Stocks Using Penny Stock Trading Rules

If you are a penny stock trader you need to adhere to a specific set of trading rules if you hope to be successful. Too many traders are simply looking for cheap penny stocks or are buying stocks and shares based on the recommendation of someone else. They really don't know how to buy penny stocks effectively; they are dependent on others to give them the information they are seeking. This will lead to disaster in your trading if this is true of you.

Rather than chasing down penny stock recommendations from penny stock newsletters you need to develop a set of trading rules that will propel your trading to the next level. Trading rules are designed to keep you out of problem trades. Rules in trading are there to protect you and your money from the stupid things that you will do when fear and greed begin to invade your well thought out penny stock trading system. Here are a few rules that I try to live by when doing penny stocks trading.

Do not feel as if you need to be involved in a trade at all times. Sometimes it is best to sit on the sidelines and wait for the next opportunity to buy penny stocks. Penny stock investors who feel the need to trade will force a trade quite often. Some of them might work out but most of them will not and those will most likely cost you quite a bit of money. Do not force a trade when one is not there.

Penny stocks trading should be done in large share quantities. Penny stocks are cheap therefore they afford you the opportunity to purchase many shares. I believe this is a must. I buy at least 1000 shares of every penny stock I buy. If a stock moves 20 cents then I have made $200 dollars. If I owned 3000 shares I have made $600. This is the profit potential at your fingertips when you trade penny stocks.

As a penny stock investor you should be concerned about sticking to stocks with good trading volume. Low volume stocks are too easily moved against you when you try to enter a position or exit a position. If you were to try to sell 3000 shares of a stock that only trade 15000 shares per day you are going to depress the stock. However, you can sell those same 3000 thousand shares in a stock that trades 1,000,000 shares per day without it even being noticed. Do yourself a favor and stick with high volume stocks.

Stay away from bankrupt stocks. They are not going to come back. Most bankruptcies will end with the stock investor losing everything so don't play with fire. Investing in penny stocks that have no hope of survival as a company is not a good trading strategy. Focus your attention on safer stocks.

There are many other trading rules to live by but I will only give you one more so as not to make this hub too long. You should not be buying penny stock shares when the company is near its earnings report. Let's face it, penny stocks don't have the strongest fundamentals in the world. Don't kid yourself into thinking that they do. The news can be quite bad at earnings and it is likely even if there is somewhat of a surprise that the stock is not going to get much of a bump. After all, no matter how good the report the stock is probably still losing money.

Remember to learn how to buy penny stocks effectively you need to have well thought out trading rules and then stick to them.