Posted on 06 April 2012.
An often overlooked, but important, aspect of penny stock trading is knowing when to take penny stock profits. While many penny stock traders focus their efforts on finding penny stock trading opportunities and figuring out the best time to buy penny stocks, knowing when to take penny stock profits is an equally important part of successful penny stock trading that is necessary to maximize penny stock trading profits.
Once you have brought a penny stock, it is time to determine a realistic price to sell the penny stock. Knowing when to take penny stock profits in a particular penny stock is dependent upon a number of factors. First off, what are your expectations for the penny stock trade; is the trade intended to be just a short term scalp trade that you will be happy to make 10% or 20% profit from, or are you looking at a medium term trade and expecting to book 100% or greater profits? Set your penny stock profits level based upon your expectations and set a price target to sell. Do not forget to also set a stop loss level, in case the penny stock unexpectedly loses value, so you can limit your losses. Make sure you sell the penny stock and take penny stock profits once your price level has been reached, as penny stocks are notoriously volatile and a penny stock gain can quickly turn into a penny stock loss, if profits are not taken. No penny stock trader ever went broke taking penny stock profits.
Setting price targets and selling at those targets is a rather vanilla way to trade penny stocks and to book penny stock profits. There are a number of trading strategies that seasoned penny stock traders use to increase penny stock profits.
One strategy that savvy penny stock traders use to increase penny stock profits is to set tiered price targets to sell penny stocks that they have brought. This is the opposite of averaging into a penny stock when buying. Instead, penny stock traders average out of a penny stock when selling, which means they will book greater penny stock profits, if a penny stock outperforms on the upside.
Another strategy that savvy penny stock traders use to increase penny stock profits is to sell half of their holdings in a hot penny stock that quickly doubles. That way, they cover the cost of initiating the penny stock position and book a profit on the trade, while holding the remaining half of their shares as “free shares”, so they can book even greater penny stock profits, if the penny stock continues to move higher. Of course, a price target must be set for selling these free shares. Some penny stock traders take their cue from the penny stock price action, and sell free shares as momentum appears to fade and a near term top appears to be imminent.
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