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Penny Stocks Trading


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Understanding Penny Stocks Trading

Penny Stocks Trading Like other types of stock trading, penny stocks trading includes a wide variety of strategies from day trading to longer term trading.  However, there are some significant differences between penny stocks trading and stock trading in stocks listed on major stock exchanges, which need to be understood to be a successful penny stocks trader.

Penny stocks trading is much more geared towards shorter term trading than longer term trading or buy and hold investing.  This is due to a number of factors.  First off, penny stocks do not pay dividends, so there are no long term dividend benefit associated with buying and holding penny stocks, or holding them for a long trade.  Second, penny stocks price moves are driven mainly by news rather than long term fundamentals.  Third, penny stocks are thinly traded and therefore, trading them requires adequate volume and market interest.

Penny stocks trading includes day trading, which involves quickly buying and selling penny stocks within a day or many times during a trading session to take advantage of daily price movements.  Penny stocks trading also includes position trading, which involves buying a position in penny stocks before an expected news event, and then selling when the news event happens and the penny stock makes a move.

What a Trader Needs for Penny Stocks Trading

Penny stocks trading requires Level II Quotes that provide all of the best bid and best ask quotes and the associated order sizes for penny stocks.  Knowing where the other stock market participant’s bids and asks are and the size of the offers to buy and sell in particular penny stocks is crucial to being a successful penny stocks trader.  This is especially important if a penny stocks trader is day trading and needs to get into and out of penny stocks quickly.

Penny stock traders involved in penny stocks trading can also make use of direct access trading systems (DATs).  DATs provide penny stocks traders additional order routing control and order execution speed, by allowing penny stocks traders to route penny stock orders directly to market makers, specialists, or electronic communication networks (ECNs).  This provides much faster order execution and greater control versus going through a retail online broker that routes orders at their own pace to their preferred market makers.  Penny stocks trades can be executed directly and without delay by penny stocks traders using DATs.

While there are many places to find penny stocks trading tips, http://investorshub.advfn.com/ and http://siliconinvestor.advfn.com/ have the most active penny stocks trading boards on the Internet for finding useful penny stocks trading tips and information.

Penny stocks trading tips can also be obtained from penny stock trading tips sites that offer email alerts, such as http://www.stockrockandroll.com/.

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