Penny Stock Trading Rules
Here is a general list of penny stock trading rules I like to follow. These guidelines help me plan my entrance and exit strategies and keep my from getting too greedy. It also helps to preserve capital and relieve stress.
1. Don’t chase the ask. You missed out. There will be many other opportunities. A common question that I get is, “How Do You Find the Next Big Runner?” The truth is most penny stock traders don’t live off the big runners, only the promoters get the big scores. The true trader looks for opportunities and exploits them over and over.
2. Idiot you are down 20%. Get out. It might come back up, but live to trade another day. This is a common newbie mistake, they end up holding the bag and don’t know where to exit a trade.
3. Don’t load the boat; you will fail more often than you will win. Greed and fear will cloud your mind.
4. Averaging down results in losing more money. This isn’t like the big boards where averaging down is usually only a few percent and the stocks have a tendency to appreciate over time. This is exactly the opposite as penny stocks tend to depreciate over time due to market maker shorting.
5. Is it really Market Maker games, or are all the longs just selling? It might be time to sell. People on forums lie, in fact they are probably selling their shares to you.
6. Don’t buy news that everyone expects. This is what newbie traders do and this often occurs during a promotion.
7. Have a set exit point. Enter near support, exit near resistance. You should become comfortable with technical analysis to help you determine if your entry is a safe buy.
8. Immediately sell bad news. Don’t be a bag holder. I once watched someone lose $200,000 in two hours when a company put out a reverse merger press release.
Look at what could have happened to you if you averaged down or held during this bad news: