Hello Folks nice to see you again.
Do not dive into day trading penny stocks without a thorough comprehensions to this blog.
Allow me to inform you a little bit about penny stock. Penny stocks are stocks that on the OTCBB (Over The Counter Bulletin Board) and Pink Sheets (think of the OTCBB and Pink sheets as the Nasdaq and New Year Stock Exchange of Penny Stocks). Their typical price/share is around $0.0001-$5.
Day trading is buying and selling shares of a stock on the same day.
If you're not familiar with penny stocks and day trading at all, my advice to you is get familiar with them. There are a free basic education/learning you can get from the internet. Because I'm only going to share with you the most significant points in this blog.
Let's go over one more time,
Penny stock XYZ is trading at $0.05 cents/share. That means each share is worth 5 cents. You buy 10,000 shares of XYZ. That means you spent $500 (0.05x10,000)
Penny stock XYZ rises to $0.08cents/share. That $500 you invested in has turned to $800 (you sold 10,000 shares at the price of 0.08 so $0.08x10,000=$800).
$500 to $800 IN ONE DAY! That;s a 60% gain. You will not see 60% gains in ONE DAY with stocks trading at the NASDAQ or NYSE.
ONLY PENNY STOCKS DISPLAYS THIS KIND OF RAPID GROWTH!
WITH DAY TRADING PENNY STOCKS, YOU BE ABLE OT OBTAIN 10% A DAY EASY IF YOU STAY ON THE POINTS.
Here what you require before you started:
1. A dependable as well as high-speed workstation (at least 120 gb RAM, at least
1.6 ghz processor)
2. Fast connection. DSL/CABLE/WIRELESS
3. EquityFeed
EquityFeed is a must in order to day trade penny stocks. Equityfeed is a
real time data feed application, news (PR Press release) and the tool that will
produce THE EDGE you require to benefit from day trade penny stocks. Free
stock quotes on the internet are delayed 15 minutes, wich is an eternity in day
trading. You will need the Microcap Equities Package plus the Level 2 Quotes.
Sign up now for a 30 day trial of EquityFeed!
4. Understanding of this blog (read it at least 5 times)
5. One month of paper trading experience alias fake money (use Yahoo Finance).
Even after reading this article and understanding it, you have to APPLY IT. If you start with real cash without any practice, you will lose it out of emotion. It will be better to utilize fake money to get a sense for your proficiency. After you're finished through paper trading at least 3 weeks, go setup an online broker account such as E-trade, scottrade or Zecco (my favorite)
Significant Points:
1. We want High Demand plus Low Supply, if you locate that combo, you're certain to
discover an increase price.
A. HIGH DEMAND = GOOD NEWS + HIGH VOLUME
- You don't require to do Enormous amount of analysis, You're just riding
the pressure wave taking profits from it. Keep in mind, you're buying
stocks at 9:35AM and selling at 10:04. In other words day trading.
- Look for the NEWS, by the way you'll find the news from the Equityfeed
software. What type of news, the news that has "Amazed" factor.
After reading the PR, is it sufficient to make you say Amazing?
Here are a number of news to look out for:
A. AFFILIATION WITH A BIG COMPANY.
If a main corp is doing business with a penny stock company, that speaks
volume of the penny stock company. Large corporation are extremely
careful who they do business with.
B. NEW PATENT.
If a penny stock company has rights to a new patent, that is really great
news. What that means is that the penny stock company basically
has a monopoly on the product/service that they got the patent for.
C. GREAT QUARTERLY FINANCIAL NUMBERS.
Each year, penny stock corporations issue their quarterly numbers. some
of them contain really great numbers. This can be due to a number of
factors such as greater number of contracts, royalty fees, higher demand
for products/services, etc.
D. ESCAPE FROM BANKRUPTCY.
When penny stock company announces that it has filed for bankruptcy, the stock price goes down drastically. Panic selling ensues. The price is at an all time low. after that, if a company releases a PR drawing up a detailed arrangement of Escaping bankruptcy, you've got a basement floor bargain here. Costs are at an all time low, and the company has a sketch to get out of bankruptcy. Investor come in and buy again driving the price back up. You can get a slice of that action.
Observe though that a plan in it of itself is enough psychological leverage to acquire investors to purchase in addition to drive the value back up. It's all concerning investor psychology.
E. REVERSE MERGER.
A Reverse Merger is essentially money in the bank. A number of of the corporations within the penny stock market are "shell" companies. They serve no purpose except to function as a way for private corporations.The customary way designed for a private corporation to go public is to release an IPO (Initial Public Offering). This can be very costly and time consuming. To get around that, the "shell" company offers its shares to the private company to buy it out. The private company, by captivating those shares, owns the majority of the "shell" corporation's stock.
This effect in a transfer of ownership from the "shell" company to the private
company. The private company then becomes a publicly traded company. The cause why there is a guarantee of an increase in price is as the "shell" company did not have any assets and was not generating any revenue.
The private corporation, no doubt, has assets and is producing revenue and assets overnight. The value of the stock should replicate the acquisition of these new
resources and revenues, and it does so by increasing the price or the value of the penny stocks.
F. LEAVING TO MORE MAJOR EXCHANGE SUCH AS THE NASDAQ, OR NYSE, OR AMEX.
If a penny stock corporation announces that it is leaving the OTCBB or the Pink Sheets to go to trade on a more "major" market, that's a good sign. Markets like the NASDAQ, NYSE, AMEX have strict requirements that must be met before they can be traded. These seperate the men and the boys.
G. BUYBACK OF SHARES.
If a corporation announces that it has won multi-million dollar contracts, that actually means that their revenues have increased by that much.
Even though the service has not been rendered it's investor psychology that the company has a lot more revenue right now. The stock ought to reflect it, as a result it goes up.
H. DOING BUSINESS INTERNATIONALLY.
When a company begins doing business internationally, it alerts that it has the resources and capabilities to do so.
To sum up identifying good news, use the amazing factor. If the news doesn't make you "amazed". It's not worth it.
2. LOW SUPPLY = LOW FLOAT + RSI LEVEL BELOW 50
A. Float is simply the number of shares that are available for trading.
There are exceptional shares which are the total number of shares, and then there is the float, which are the total of shares that are actually allowed to be traded.
You want to buy stock with a low float. Anything under 30 millions shares is considered to be a low float for penny stocks.
B. The next factor is the RSI (usually located on the top left of the chart).
RSI stands for relative strength index and is a momentum indicator that tell traders how oversold/overbought the stocks is. That's the cool thing about day trading penny stocks.
You just need to depend on single technical indicator. You don't have to worry about all those additional confusing indicators. The more oversold, the lower the RSI would be, the more day traders like. A RSI of about 20 is considered to be exceedingly oversold.
As day traders, we like it when the RSI is at 20. Most stocks bounce up at that level. A RSI of about 80 would be considered overbought. Most stocks values go down after reaching that level.
HIGH DEMAND = GOOD NEWS + VOLUME and LOW SUPPLY = LOW FLOAT + RSI BELOW 50
3. LOOK OUT FOR THESE TRAPS:
A. The Dreaded S-8 filing
It's a piece of paper filed by the SEC revealing them that they presently increased the number of shares in the stock. Keep in mind about the low supply, S-8 INCREASE THE NUMBER OF SHARES IN THE FLOAT. WE DO NOT WANT THAT!
B. Message Boards
Message boards are filled of pumpers and bashers. Pumpers are community who have purchased a stock and want other people to purchase the stock by posting "evidence" to drive the price up.
Do not leave your destiny in other people hand. Stick to your own gun. Do not allow them influence you. And they will do a very good job at it. Then there are bashers who make you believe the stock you picked sucks so they like you to sell.
Don't pay attention to them! Message boards cloud your opinion and make you behave illogically and irrationally. Stay AWAY!!!!!!!!!
C. Stock promoting emails/Faxes
You may get an email of fax saying that some stock is going to skyrocket 1000% in the next 2 weeks. It's going to be big, You'll make a ton of money. Guess what? No, it's not. Plus, even if it does, who cares? You are a day trader, not a long term holder. You get in and out within a day. Not several days, weeks or months. TODAY! DELETE THEM!
D. Group Runs
Group runs are where organized groups of traders buy up shares of a stock that normally has low volume. Before long, other people observe abnormally large volume on this stock and get in on it, thinking something big is going to happen. But it's a trap.
When other people begin to buy, the group starts to "sell into the buying pressure" and the traders who buys at the uppermost buying point is "caught holding the bag".
You can decide to make investments in these but make sure to get out quick. My advice is stay away.
E. News Release Overdose
There are some companies who "talk a lot". They release press releases on a daily basis informing of what they did on that day and sometimes issue the same press release in different words. The more press releases that come out of a corporation, the less meaning each successive one has.
It essentially devalues their press releases. Corporations that RELEASE PRs WHENEVER SIGNIFICANT DEVELOPMENTS OCCUR ARE THE TYPES YOU SHOULD BE SEARCHING FOR. So if you see good news pop up, make sure to verify the corpoation's current news releases. On occasion, you'll find that the PR you're looking for at is merely a recording of a previous PR, such as yesterday.
F. Okay news
If the news you pick up is not that great, your proceeds will not be that good either. Make sure the news is good. Make sure it's going to impress you. As you paper trade, you'll get a sense for what constitutes "AMAZING" news and "okay" news.
4. THE STRENGTH OF TRENDS
There are some stocks that compromise of a specific part of the sector that show more than 100% gains within the course of a day or a couple days. These are what I call"trend stocks". That's because they follow the current trend.
The technique trend stocks works is this. Frequently, news or events begin circulating that are Huge.What happens then is that experienced traders begin to make a "watch list". They include all penny stocks that are connected inside that trend.
When one of those penny stocks releases a PR situated on the curent trend,
the traders converge on it and buy it up like crazy, driving the price up. This in turn generates a enormous snowball affect. Other traders observe this and make start
making the associations and company releases a PR associated with the current trend, the same thing happens.
5. THE BEST TOOL.
Yes, you must have "EquityFeed". I can't stress it enough, it's the most significant key here.
Sign up for Microcap Equities Package plus the Level 2 Quotes. Anything to do with penny stocks "EQUITYFEED" is the way to go. This is the finest of the finest, the cream of the crop. The finest software program used for trading penny stocks. After you sign up understand it, occupy yourself. Have fun with paper money until you become an expert. And afterward, progress to real money.
With "EquityFeed":
A. You be able to locate Top performing 400 penny stocks in real time plus the top 400 also has yesterday's data as well.
B. Pre-Market activity - The top 300 displays which stocks are trading prior to the market opens. If a stock is showing pre-market buying activity, changes are that something is about to happen.
C. Filters our "promotional" press release, which are just hype. You simply see real news that can affect a company's trading activity. You only care for real PRs.
The software cut all the bull as a result you left with the high-quality stuff.
D. Chart/Quote Montage
- has all the information you
- Quick notes
- Real time sales
- displays you every trade that is made by showing the number of shares purchased as well as sold and the time.
- Bid/ask - this tells you the price at which you can purchase shares and the cost you can sell
- 52 week high/low, this tells you what the maximum and lowest cost were during the course of 52 weeks.
- Volume, displays how many shares are being traded
- $ volume, tell you the total amount of money being used in trading for this stock.
- number of trades, self explanatory
- % change, you can see how much percentage gain/loss the stock is experiencing
- close, indicates at what cost the stock closed the day before.
- open, shows the at which the stock opens
- High, the maximum price so far during the day
- Low, the lowest cost that has been reached so far during the day.
- Full Company profile
- News and Filings, a three month archive of all news and filings made by the company.
- Time interval charting - you can see how many shares were traded at given interval of times throughout the day.
- volume Graphing, you can pull up a volume for the day or for 2,5,10 days, 1,2,,6 months and 1 year.
- Trading Alerts, Alerts you to which stocks are hitting the 52 week high/low.
- Streaming Filter, Extremely Powerful Tool.
- Watch EquityFeed�s video tutorials. They are a great way to preview their extremely comprehensive and friendly interface.
6. HAVE A PRE-SET STOP LOSS PERCENTAGE
Chances are, if stock is tanking, there is a reason. Do not TRY TO RATIONALIZE BY SAYING IT'S GOING TO GO UP, BECAUSE 9/10 TIMES, IT'S NOT!
For example if I lose 10% of my initial invesment, I get out. Tomorrow is another day. ACCEPT IT! NOBODY'S PERFECT. Just make sure you construct more gains than losses. AND REMEMBER BUY AND SELL ON THE SAME DAY!
7. POSSES REASONABLE PRE SET PROFIT PERCENTAGE GAIN
IF YOU MAKE 10% GET OUT and trends 20%! Don't be greedy. 10% may not seem a lot, but 10% daily for a month can actually add up.
8. EDUCATE FROM YOUR MISTAKE AND STICK TO YOUR SYSTEM
You wil make them and learn from them. STUDY THE MARKET EVERYDAY! Spend about 30 minutes a day going over the top performing stocks.
This is where Equitfeed is extremely useful. It's an instruction in itself. If you live in west coast, the market open at 6:30 am. You get up at 6, study the market
for 30 minutes before it opens and invest. Then go on with your day.
9. DO NOT USE THE MONEY FOR THE BILLS
You will be emotionally attached to your money and create unintelligent decisions. It places massive tension on you and stress that will change your judgement.
YOU NEED TO USE MONEY YOU DON'T NEED!
10. NEVER BUY WHEN THERE IS A HUGE SPREAD BETWEEN THE BID AND THE ASK.
For instance, if the bid is $0.05 and the ask is $0.10. They would indicate in order to buy shares, you would have to buy at $0.10. If you wanted to sell those shares, you would sell them at the bid, which is $0.05. You would lose half of your money.
Now let's talk about Money!
First, you have to decide how much "training" and real money you're going to use. Everyday is an opportunity to earn cash. You have to make sure you have cash everyday to take advantage of that. Here's the most excellent method to do that.
- Determine how much money you're about to spend investing in one stock. Let's presume $500. You will buy $500 worth of shares every time you invest.
- Multiply the number by 3. Example: $500 x 3 = $1500. That's how much cash should be funded into your online account or into your paper trading account. That's all the money you will need to establish.
- Let's presume you buy $500(I would start with $1000, but if your cash is limited, $500 is good) worth of shares on Monday, and sell it when the stock increases by %10. You've made $50 ($500 x .10) minus fee. And repeat it for Tuesday and Wednesday. You've used up all your cash. and then what? For Thursday, the cash you spent on Monday will have "settled" and will be available for use the next day, Friday, etc. There is a three day settling period before that cash can be used to buy and sell again on the same day. That is the best way to maximize your money.
Follow those steps in paper trading(yahoo finance) and when you actually start day trading.
Ok Folks, those are the significant points in order to make money in Day Trading Penny Stocks. I hope you study them, follow them to a tee and I have faith that you will make money soon.
Don't be discouraged, press on and don't be lazy. Once again, Do not hesitate after a thorough analysis (you"re going to lose your momentum if you hesitate) and never chase a stock.
Take the first step, make a commitment to yourself that you're absolutely going to do this. If you read this far, it shows that you have courage.
Above all, depend yourself on God's Grace. I want to say good luck, but it's not luck if you know what you're doing. Therefore, have a bless Day Trading.
Sign up now for a 30 day trial of EquityFeed!
