Penny stocks look powerful and mysteriously attractive as they don’t cost much money and yet promise big profits. However, every step related to buying penny stocks is very important and so is the final stage of trading when it comes to making money with penny stocks.
One must gain proper knowledge of other factors of penny stocks and then come to the stage of trading a penny stock. You must also follow some useful tips in order to get a better result and therefore it is advised to follow the below-mentioned guidelines-
Penny Stock Limit Order
Penny stocks usually have a low number of shares traded. So, in order to avoid any loss, there is an option of ‘Limit Order’. You must use it while planning your strategy to sell or buy a penny stock. By using this guideline and showing your preference, you may avoid paying extra fees if a trade doesn’t meet your criteria.
Penny Stock Entry Price
You must be very careful and attentive when selecting the price of a penny stock for selling or buying purpose. One must thoroughly understand the pros and cons of penny stocks priced at a certain level before proceeding. Based on this selection, your profit and loss will be decided.
Trade Entry Execution
While trading penny stocks, you will see that these equities move very fast and this is where you need to play it smart. Such situations will test your risk tolerance and could cause you to ignore your general trading strategy. So, spare a few seconds and see what you have entered. Make sure it is correct or not before submitting your buy or sell price. It is better to abort a trade than to face unrepairable loss.
Stop Loss Strategy
This is another feature, but it is generally not provided by the stockbrokers when trading lower priced stocks. Mainly, when it comes to penny stocks that trade on the OTC Markets or OTC Bulletin Board, stop loss options are not available. But for penny stocks trading on the NYSE or NASDAQ, most brokers offer the option. Nevertheless,, you can use this trick on your own as a “mental stop loss.” Suppose, you can afford a loss of 10% on your penny stock trading.
You would immediately put your limit order if you find a penny stock matching your parameter. The big thing to remember is to stick to your plan. Risking a big loss to maybe return a triple-digit gain isn’t smart. Instead, it may be better to sell for a small loss and then buy back if or when the penny stock moves back up.
Do not rush with your fingers and be very cautious with your decisions while trading penny stocks. The stocks can rapidly fluctuate in price. Penny stocks can go higher in moments and then they can fall back even sooner. So, avoid paying higher than your planned amount for a stock that has crossed your paying limit. Be confident and follow your plans and the parameters you have set. You must preserve your capital and escape being caught by losses.