General Business

Day Trading And Traditional Penny Stocks

Investing in the stock market is a varied and interesting business. Beyond day traders, who can make money with multiple small trades each day, there are all sorts of actors in the market that have different ways of making money. There are institutional investors like city pension funds and labor unions that have large, long-term funds making medium-sized percentages on large amounts of money.

There are conservative investors in the model of Warren Buffett that like to study emerging companies and make steady, long-term bets on their strategic advantages within a given industry. The risk level is relatively low, but so are the returns and the excitement. And there are investment banks and hedge funds that have bond traders, international currency traders and proprietary algorithms that make big time money for clients.

But day traders can still make a very good living, with no boss and no boring cubicle chaining them to a company. And they can make that money by investing in penny stocks. Penny stocks are companies with share prices between $2 and $10 per share. Many large investors and Buffet-style investors stay away from them because they have a reputation for being akin to gambling. The volatility, the fact that the stocks have fallen off the NYSE into the pink sheets and the lack of information about the companies are all turnoffs for traditional investors. The potential for fraud and manipulation is always there.

But for day traders, the calculations are different. Penny stocks and their inherent volatility are a plus for day traders. Day traders thrive on volatility. Big moves, whether up or down, make for opportunities to lock in profits. And day traders can avoid the ramifications of pump and dump stocks sold by PR mavens because they hold stocks for a very short period of time. The entry and exit strategies are what make day traders their profits.

Small-cap stocks can be lucrative for day traders, just like penny stocks. Stocks that trade under $100, especially in the biotech, fiance and internet sectors can represent great opportunites for quick hit investments. While institutional investors may tend to stay away from those companies, because they are prone to 50% drops and 100% upward squeezes, that just means that day traders have all those potential profits to themselves. But timing and risk management are the keys to all of it.

Entry and exits into penny stocks on a daily basis are vital to get right, because the spikes and valleys can be so intense. Timing your trades correctly and putting the right risk management protocols in place are very important for making profits on a day to day basis.

How to do that is a matter of strategy and technique. The strategies can be learned, though, with the right day trading education program. All you need is the drive, the small amount of cash for the classes and the time to educate yourself. Then you can be on your way to financial freedom.

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