Day trading penny stocks is a stock trading strategy that is commonly used by many traders in the market today. This strategy is implemented by using short-term trades of inexpensive stocks to make small, regular profits. As the name implies, penny stocks are stocks that trade for small share prices. In many cases, you can buy a share of stock in the company for only a few cents. There are thousands of companies out there that trade for very small amounts of money. Most of these companies are not traded on the large stock exchanges. In order to gain access to this market, you will usually have to work with a stock broker.

Day Trading

Day trading is a strategy which utilizes several short-term trades. Instead of investing for the long-term, you are going to try to benefit from small price fluctuations in the price of a stock. Stock prices are affected by a number of different things on a daily basis. In some cases, the prices of a particular stock could change substantially over the course of a few days. Day traders utilize a number of different strategies to try to capitalize on the movement of these stocks. Day traders will usually place several trades everyday in order to increase profits. 

Profit Potential

Getting involved in day trading penny stocks can be extremely profitable. Many times, there is huge potential for investors in this market. When you look at the numbers of the market, it does not take much dollar movement to net a large percentage gain in your account. For example, if you purchase a stock for $.25 per share and it only increases $.25, you have doubled your profit. The price of the stock does not have to increase very much for you to make a nice return on your investment.

Another good thing about this market is that there is not a great deal of volume in the market. This means that it only takes a few buyers deciding to purchase a stock to make the price of the stock increase. When compared to the larger stock markets, it does not take nearly as much movement to affect the price of the stock.

Smaller Investment 

The penny stock market does not take a large initial investment. When you are dealing with penny stocks, you can buy many shares of a stock for as little as $100. When you are dealing with the regular stock market, $100 would not be enough to purchase multiple shares of several stocks. When dealing with smaller numbers like this, you can purchase many more shares of stock for a minimal investment. This allows individuals who have less money to trade to get involved in the stock market.

blog comments powered by Disqus
Scottrade