Hot Stock Penny Strategies
If you’re in the market for penny stocks, then you should be aware of the term hot stock. The term hot means that the stock price has reached a new high or is at an all time high. So when this happens, everybody jumps on the bandwagon and starts selling in the same direction. But this is not necessarily good news. If there is a large volume spike in the same direction as the hot stock, then it can be very difficult to sell, because there may be too many buyers. This is known as a market maker’s problem.
Market Makers Are Dumb People When looking at day trading penny stocks, it’s important to understand that market makers are dumb people. Market makers like yourself have a psychological reason for staying in the game long term. Market makers get a bonus when the price of a stock increases, but only if the price doesn’t drop. They have a psychological aversion to risk, so they will stay in the game even if their bonuses get eliminated. And that’s good news for you, the retail investor!
The Best Penny Stocks to Watch Are the Ones With the Most Interactive Brokers are the absolute best way to trade a penny stock, simply because they offer real-time communication between you and the market maker. This communication occurs through chat rooms, text alerts, phone calls, emails, instant messages and web-based software. And this allows you to take full advantage of your buy and sell signals, which helps your bottom line, and keeps you from losing money when you least expect it.
Most Penny Stocks Are Created Equal There are two major exchanges where you can buy shares of these cheap, junior high caliber stocks, and these are the AMEX and the NASDAQ. Although both of these stocks have their own quirks, both of them have the same structure. AMEX and NASDAQ use the OTCBB (over-the-counter) market for these stocks. They are traded on the same level 2 exchanges as the major exchanges, but unlike the major exchanges, the OTCBB has lesser fees and commissions for trading, and offers smaller start up capital.
Major Penny Stocks Don’t Move Much Beyond the Pink Sheets These days, penny stocks are being traded on pink sheets (a special stock exchange operated by pink sheet companies). This is not a bad thing per se since these stocks are much less sensitive to short term trends and fluctuations. But because many brokers do not allow traders to use margin accounts or pay out capital without having full possession of the shares, they often move very slowly. In fact, due to the very nature of these types of stocks, they are not used for day trading, and many investors limit their exposure to these types of securities. Also, due to the very limited nature of these pink sheets, they carry significant higher risks and since there is very little liquidity, they also cost more to trade.
Hot Stock Penny Strategies You can take advantage of these low cost, high liquidity options, however you have to be very careful when selecting which of these hot stock penny strategies to use. One of the most popular micro-cap stock strategies is called the Day Trader System. This system is especially popular among day traders who like to get into trades quickly and make money very quickly. The Day Trader System buys a variety of penny stocks, calls them all, and sells them all on the same day. The advantage is that you can get in and out of a particular stock very quickly and make money very quickly. There is of course the risk that you may lose a few, or even all of your penny stocks, but this is the best strategy for rapid growth in the micro-cap space.