The Question may arise in your mind that why trade penny stalk. In this article, we will discuss why you should trade penny stalk. There is a common misconception that there are stocks that trade for one cent, even a hundredth or thousandth of a cent, but that is not correct. In traditional terms, a penny stock is any stock that trades for less than $5 a share. So It should be noted or remember that if you are looking at stocks, a lot of more popular penny stalks are the $1, $2, and $3. You can get more details about stock here otcmkts:xdsl.
1- Extreme moves over a short period of time:
One may have a stock Like Apple or, Microsoft, or Google or Facebook. These stocks take weeks, months, sometimes years to move 10, 20, or less percent. The great thing about low price stocks is that you can get 20% moves in minutes. We even see 100, 200, 300% moves in minutes, hours, or over the course of the days. So it is one of the main reasons to trade penny stock is the big moves and the ability to get in and out quickly.
2- Liquidity or Ease of Entry:
When there is a hot penny stock in pay, some of them will trade 10 million, 50 million,100 million, maybe even sometimes several hundred million shares a day. It shows you that there are a lot of traders in and out. As it is mentioned in the first step that these stocks make hundreds of moves, you need Liquidity to get out when you want to get out. If you get stuck in an illiquid penny stock, it can be bad whether you are long or short. If you are riding the stock up for minutes, hours, or a day, if it quickly reverses, you need that Liquidity to get out. Avoid any penny stock that is not trading at east one million shares a day.
3- Diligence can be rewarded:
The great thing about the low-priced stocks is that the big boys don’t really care about them. You can find unknown information and be the first one in that stock. A lot of these low-priced stocks become amazing short sell opportunities. One of the great things about the low price stocks is that it is a small niche, and you are not up against these huge investment banks.
4- Create so many opportunities:
The one thing that everyone loves about penny stocks is that they create so many opportunities, both long and short. The great thing about short selling is you can make money on the way down as well. If you are a long bias trader, you can target trading when the moves start, when the press release hits, or the earning are announced. If you are a short bias trader, you can wait for few days when the stocks start to have some profit takers. You can trade one penny sock several times over one day, long or short.
Every day there is a low-price stock that is moving. Lots of times multiple. Sometimes back in 2016, 2017, even early 2018, we have seen that it starts to warm up again. There were weeks where we have three to four of these big movers a day. One good thing about trading that it allows you to spend time with your family. You don’t necessarily have that luxury with the higher-priced air quotes, real stocks.
In a nutshell, Penny stock typically doesn’t care what the overall market is doing. You could have a brutal down day, in the SPY or dow jones, and there might still two big movers in the low-priced stock lane.