Can You Lose Money Trading Penny Stocks?

 

Averaging down to deal with losses?

One common technique for dealing with losses is called “Averaging Down”. Averaging down means buying more shares of a particular stock on the event that the stock goes below your original purchase price.

An example would be originally buying 100 shares of ABCD at $1.00 per share, and buying another 100 shares of ABCD at .50 a share because it went below your original entry point.

Cutting your losses?

The best way to deal with a penny stock when it goes completely against you is by simply cutting your losses & cutting them early. You can do this automatically by setting up a conditional order called a “stop-loss”.

A stop-loss is designed to literally stop your account from taking further losses by allowing you to set a minimum acceptable price at which the stock must always be greater than. If the stock falls below this price the stop-loss will trigger & automatically sell your shares at the current market bid.

A stop-loss is great at protecting your trading account from critical losses, and making sure fear and greed don’t persuade you to stay too long in a losing trade.

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