Do These Make The Cut Of Penny Stocks To Buy Right Now?
Penny stocks usually trade below $5, but there are other penny stocks that might be trading at even lower levels. It is possible for investors to find value from among those stocks as well but you need a good eye for quality penny stocks. For instance, there are penny stocks that trade below $2 and some trade even less than $0.50. However, it should also be kept in mind that many of the stocks at those prices might present extreme risks.
This is one of the main things you should understand before deciding on penny stocks to buy. Not every trade is a winning trade. But that doesn’t mean if you are in a losing trade, you lose your whole investment. Understanding how to manage risk is just as important as understanding when to take a profit. There are a number of strategies you can adapt to your personal trading plan. Some will employ the “tiered trading strategy” where a trader will scale into a trade.
Essentially, you take a small starting position, wait for a stock to start confirming its move and then progressively buy more and sell on the way up. Not only does this allow traders to stay in a trade longer but it also allows you to cut losses quickly and make them smaller losses at that. For example, the trader who scales into a $1,000 trade may take $250 and buy a starting position.
If the trade deteriorates, the cash outlay is $250 and you would take a loss on that amount. This is compared to other traders who go “all-in” and start & end with the full $1,000 trade. If the stock drops 25%, the first trader would only lose about $62.50. The “all-in” trader would lose $250. So it’s important to understand your own risk tolerance and make smart decisions. On that note, we’re taking a look at 5 penny stocks that could be on the buy or avoid list this week.