Learn How To Day Trade Penny Stocks

If you are going to day trade shares this means that you will buy and sell shares in the same day, sometimes you will hold them for the most part of the day and other times only for a few minutes and just about never overnight.

An investor is less concerned with short term price swings and will prefer to hold onto a stock for a longer period of time waiting for the value of the share to appreciate with time. For both methods there will always be pros and cons for each.

If you need some more background knowledge about penny stock investing before going any further then check out Micro Cap Stock Investing

Traders can sometimes enter and exit many times over the day when trading these stocks, using the intra-volatility to make an income.Therefore in order to make consistent returns you want to find shares that are highly volatile.

As a day trader no matter what type of day the general share market is having you will always find highly volatile shares and as long as you identify the trend as going upwards then you can start trading!

Check out this more extensive guide at Day Trade Penny Stocks

Volatility can be a great thing for a day trader but also a great danger because a stock that can move up very quickly can also move down very quickly and you end up with a substantial loss.

If you are new and make a lot of these mistakes early on and have too much of your capital invested you can end up with losing all your money very quickly.If you remember to only ever trade with money that you can afford to lose you must still proceed with caution when starting to day trade penny shares as the appeal of making considerable profits comes with it a much bigger risk.

Be wary of becoming caught up in what is known in the industry as a 'pump and dump' scenario which often occurs to those micro cap stocks you may have seen advertised in your spam emails, in which investors rush into to buy the share quickly and then sell off at a profit and if you're not quick enough you can end up with a sizeable loss.

The worst case scenario is you are left holding shares in a stock that is now worthless and this ties up all your money to invest in other shares.

You should set aside the majority of your investment money when looking to day trade penny stocks and invest it into more established shares or other more stable investment options and only trade with a small amount, especially if you are just starting out.

You should base that decision by looking at how much of your investment can you afford to lose.

The next step is to set yourself up with an online brokerage account and if you are going to be a true day trader and only buy and exit positions on the same day then you should ensure you have access to live market data feeds as you do not want to be making decisions on data that is 20 minutes old.

Your broker will charge you a small commission after they have executed the trade on your behalf.

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