Trading Penny Stock Tips Can Be Both Rewarding and Risky

Trading penny stock tips can be both highly rewarding and highly risky.  Penny stock trading ideas that are received via tips are often already “in play” and trading actively, or will soon be “in play”, as the penny stock trading community becomes aware of the tips.  It takes trader interest in a penny stock to send it soaring higher, which is why trading penny stock tips can be highly profitable in a short amount of time.  However, penny stocks that are trading based on tips are often momentum trades, and once the upward momentum stops, it can reverse quickly and cause a penny stock to trade lower, which is why trading penny stock tips also carries with it a heightened degree of risk.  There are steps that savvy penny stock traders take to mitigate the risks associated with trading tips associated with trading penny stocks based on tips.

Trading Penny Stock Tips | How Savvy Traders Trade Them

Seasoned penny stock traders have procedures in place to quickly evaluate tips they receive regarding penny stocks that may be poised to move higher.  It is important to act quickly and make a decision whether to buy or pass on a penny stock trading opportunity, since indecisiveness can lead to trading mistakes and losses.

The following are the typical steps that savvy penny stock traders use to quickly evaluate penny stock trading tips:

– Quickly check the newswires to see if the penny stock tip has already been widely circulated.

– Quickly check the stock share structure to see if the penny stock that is the subject of the tip has a share structure that is supportive of a move higher (e.g., a bloated share float with billions of shares may prevent a penny stock from moving higher, no matter how much buying comes in due to a tip).

– Quickly check the stock’s recent trading history, and especially the history since the tip was received.  This will provide clues as to whether the tip has already circulated widely and played out in the stock’s price, and will also provide guidance regarding good buying and selling levels

– Quickly evaluate whether the tip is worth acting upon based on what has been uncovered about the penny stock.  If a decision is made to proceed, enter the buy order using a limit order (to avoid getting filled at an unexpectedly high price, if a surge of buying volume comes into the stock).

It is important to act with conviction once a decision has been made to buy penny stock shares based on a tip.  Once you have purchased penny stock shares, it is equally important to figure out what your exit price will be to book a profit and what stop loss you will sell at, if the trade does not work out.  Determining the levels to sell (either for a profit or a loss) is dependent upon a number of factors, such as:  the float, the chart pattern, the strength of the trading action, the impact of any news associated with the penny stock tip, and prospects for future news.

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