The usual question I get when people find out I trade penny stocks is “so what are the best penny stocks to buy?”
This is usually followed by the old ‘war stories’ of how they could have done this or they could have done that, and if they did they would have made a gazillion dollars in 5 minutes. Then they’ll go on about how an analyst was wrong with his pick, or that a trading system they invested in doesn’t work.
Hogwash!
The problem for these guys (and gals) is not that the system they’re following doesn’t work, their problems is that they don’t know how to trade. Even if the best penny stocks to buy was laid out in front of them, they still wouldn’t be able to tell because they just don’t know how to trade properly.
Imagine driving a Ferrari without knowing how to drive; that’s about where a ‘trader’ who knows the best penny stocks to buy but who doesn’t know how to trade is. Now that ladies and gentlemen is a dangerous game.
Don’t fret if this sounds familiar. You just need to know how to play the game; you need to know the rules. You need to know the rules that will dramatically improve your trading, and when you do find the best penny stocks to buy, you’ll know how to play them, and how to profit from them:
Have A Plan And Follow It
Before you get into any trade, even if people are touting it as one of the best penny stocks to buy since the dinosaurs were around, you need to have a plan for the trade. You need to know when to get in, when to get out, and how much you’re willing to risk. Imagine an NFL team going into a game without a game plan…yeah, not pretty.
Preserve Your Capital
The goal of the game is just as much about capital preservation as it is about capital maximization. Regardless of how much money you’ve got to trade, do not risk more than about 5% in each trade…even that may be an uncomfortable number for most. If you’re holding penny stocks overnight, one way to test your comfort level is if you can sleep at night with that trade on; if you can’t sleep, you’re risking too much.
Meet Your Friend, The Trend
Follow the trend. It’s not that hard; buy when the market is bullish, and sell when the market is bearish. Follow the trend, he is your friend.
Trade With No Emotions
Greed and fear can play a huge part in the way you trade. Unfortunately, when either gets involved, it usually isn’t very profitable. Leave your emotions out of your trades, and just follow your rules.
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