Posted on 30 July 2012.
Penny stock traders of all levels of experience wrestle with how to trade a penny stock alert in a way that does not expose their trading account to excessive risk. Many penny stock traders want to trade a penny stock alert because penny stock alerts often send penny stocks soaring higher. The key to trading penny stock alerts is often a matter of using good judgment and timing the trade correctly.
First off, it is important to understand that penny stock alerts are only as good as where the alerts are originating. It is a good idea to do some investigation and find penny stock alert sources that reliably provide penny stock alerts that result in tradable penny stock gains. Find successful penny stock traders on Internet forums and find out how they trade a penny stock alert and the sources of their penny stock alerts.
Once a penny stock trader has found a reliable source of penny stock alerts, it is time to set up procedures for quickly evaluating and acting upon penny stock alerts. Not all penny stock alerts are the same and the performance of penny stocks after penny stock alerts can vary significantly; however, it is crucial that a penny stock trader is ready to evaluate and decide whether to trade a penny stock alert quickly once it is received.
If a penny stock has already made a significant move higher due to a penny stock alert, it may be a good idea to either not act upon the penny stock alert trade or to initiate a small position. If it appears that a penny stock has not yet moved significantly after a penny stock alert, a decision must be made whether the alert is significant enough to send the penny stock higher in price. In some cases, penny stock alerts are followed by company news that result in multi-day price gains. Over time, a penny stock trader will gain an understanding of when to act on a penny stock alert and when to decide not to act.
Deciding to buy into a penny stock alert is only half of how to trade a penny stock alert. It is important to also have an exit strategy to book penny stock trading profits or to cut any losses that materialize. If a penny stock alert trade quickly doubles in price (a 100% gain), a good trading strategy is to sell half of your shares to cover the cost of initiating the trade, and let the “free shares” ride until the upward momentum slows down, and then sell the remaining shares. If a penny stock alert trade only goes up by a few percentage points and has no momentum, it may be a good idea to book any profit available and move on. There will be other penny stock alert trading opportunities. If a penny stock alert trade is not working out, it is a good idea to cut your losses and wait for the next penny stock alert trading opportunity.
How to trade a penny stock alert ultimately depends on a penny stock trader’s trading style and comfort level regarding the potential gains associated with an alerted penny stock.
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