Surviving the Volatile World of Penny Stocks

Many people don't survive the volatile business of day trading penny stocks. Well, that's a bit grim. Let's just say that their trading accounts don't survive. Some people might even find themselves in debt from their poor trading practices because they started too big, over-leveraged themselves, and didn't know when to bail out of a losing trade. Let's examine these terrible trading habits one at a time.

First, just because penny stocks are cheap doesn't mean you have to buy 10,000 of them when you start out. They're cheap nature makes them great for learning how to trade, but you have to start small. You aren't going to make a ton of profit trading 100 penny stocks, but you will learn how they trade, and you will hone your trading skills. You might even consider starting a day trading blog to track your progress as you slowly add size to your positions as your skills and confidence increase.

Also, most brokers offer margin and leverage when you trade stocks. You don't want to use this when trading pennies because the risk is just too great that you'll get caught holding stocks for a lengthy period of time. Margin is essentially a loan from the bank, and just like a loan, you'll be paying interest if you're holding stocks on margin. You could get stuck holding penny stocks longer than you want because they don't trade a high volume, and you might not be able to find a buyer when you want to sell.

Finally, you need to cut your losses as soon as a trade fails. Don't sit around thinking that stock price will come back up. It won't. This sort of denial will take you out of the trading game quicker than any other bad habit.

It's not really that difficult to survive the world of penny stocks. It just takes a little patience and prudence when it comes to honing good trading habits, and getting rid of the bad.

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