If you want to trade penny stocks successfully you will need to develop or purchase a technical trading system. In general penny stocks with a certain catalyst typically experience significant volatility. After I locate the correct stocks through my stock scanning software using custom filters or other methods, I input the stocks into my technical trading system.
My system is made up of a group of technical indicators that are configured with non standard settings that you won’t find anywhere else. When these technical indicators and other tools I look at all give me the correct readings, I can determine when a penny stock or any security is ready to make a specific movement in price like it has historically done in the past.
In approximately 10 to 15 seconds I am able to analyze a stock and figure out where it is trading in its total spectrum or range of potential price movements. This allows me to figure out when a stock is ready to reverse direction or when it may be read to make a large move up or down. When the price patterns that I search for occur a stock will typically do what it “should do” about 70% of the time.
Knowing this sort of information allows me to know what I should expect from a penny stock, and how I can place my trade accordingly. Using position-sizing & money management I can be sure to maximize my profits on my winners, and I minimize my losses on my losers. This insures that I earn a profit even though I occasionally do experience losing trade (losing is a part of being a profitable trader!).
Based on my system I have several specific trades that I search for. I patiently wait for patterns to occur and otherwise I keep my money in my account and don’t trade. A large part profitable trading is following a method that you follow no matter what occurs in the stock, regardless of what your gut tells you. You will not earn a profit in penny stocks or any assets for that matter, in the shorter term unless you have a set of rules. Fear and greed prevent people from receiving positive returns in the market and a rule based system helps a person to battle these emotions.
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