Posted on 06 December 2011.
The most time sensitive type of penny stock trading is trading on penny stock alerts. While more suitable for active penny stock traders who have quick access to the penny stock markets and information, casual penny stock traders can also take advantage of trading on penny stock alerts, but they have to be disciplined and willing to take quick trading action.
The key to successfully trading on penny stock alerts is to have procedures in place to quickly evaluate a penny stock alert to determine whether the penny stock that is the subject of the alert is worth trading, and then to execute a buy order soon afterward, if the evaluation is favorable. While some penny stock alerts can be profitable trades long after the alerts are issued, the best way to reap a profit and avoid a potential loss from trading penny stock alerts is to be one of the first penny stock traders to act on penny stock alerts.
If possible, quickly check the best bid and best ask quotes via Level II Quotes for alerted penny stocks to determine a good price point to initiate a trade via a limit order. Once a trader has a position in a penny stock that has been the subject of a penny stock alert, it is important to monitor the penny stock’s price action and momentum for clues as to whether the stock should be held for further gains or sold.
Trading on penny stock alerts can be very rewarding for experienced penny stock traders. However, such trades can be treacherous for inexperienced penny stock traders. Following penny stock trading rules can help a trader to avoid the pitfalls associated with trading on penny stock alerts.
First, always use a limit order when buying and selling penny stocks. Due to the thin availability of many penny stocks, using market orders can be extremely dangerous, especially when buying a penny stock trading on penny stock alerts, as buying volume pours in. Avoid being the top tick of the day by using limit orders.
Second, have a system in place to quickly perform due diligence on penny stock alerts as they are received, and be prepared to buy with a limit order, if the stock appears to be worth buying. Failing to make quick decisions may mean the difference between a profit and a loss, or just a lost trading opportunity.
Third, have a realistic exit price in mind when initiating trades that are based on penny stock alerts. It is fun to watch a stock that is trading on penny stock alerts race higher; however, without having a plan to get out of the trade, a trader may watch a penny stock race higher and then fall back, erasing all of their gains and profits. Booking a modest 10% or 20% profit is preferable to watching a stock soar and fall back, and then selling it for a loss.
Fourth, keep in mind that it is okay to let some penny stock alerts go, if you feel as though it is too late to enter the penny stock trade. There will always be new opportunities for trading on penny stock alerts.
Fifth, if trading on penny stock alerts is working out well in a particular penny stock, and a quick substantial profit can be booked, consider selling enough shares to cover your initial costs of entering the trade, and then let the rest of the shares ride until the trading momentum dies down. Occasionally, penny stock alerts result in huge 1,000% gainers. If it is possible to sell half one’s shares at a 100% gain and let the rest ride, a trader may be able to catch some of the 1,000% gainers with no risk of losing the initial investment.
There are many sources for penny stock alerts. Many penny stock alerts websites, such as StockRockandRoll.com, offer penny stock alerts via email, so subscribers can receive the alerts anywhere. Trading on penny stock alerts can be exciting and profitable for those who know where to find good penny stock alerts and how to trade them.
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