There are lots of big mistakes, but I am going to give you the biggest and a strategy to avoid it.
The Biggest Mistake with Penny Stock Traders: NOT TAKING A PROFIT (and NOT BEING READY TO TAKE A QUICK PROFIT).
My personal rule when I buy high risk penny stocks is that I immediately put a sell order in that will capture the profit instantly when the stock trades at the level that represents a great profit to me. The sweet spot for me has always been 20%. Love of a stock should end at a quick 20% profit.
You did read me correctly:
The moment you get your confirmation on a successful buy of a particular stock you should stop everything you are doing and calculate a sell price that takes into account the transaction fees coming and going. Then include a profit you desire in percent. Put that sell order in. Do it as a GOOD TIL CANCELED order so that the moment that price is hit you win.
One caveat: This only works on penny stocks with sufficient volume to not get you nickeled and dimed with sell order fees over several days. So if the stock trades nothing several days a week or a month, you likely should have chosen a different stock. You could lose money if your sell order sells just a few shares at the end of the day as someone tries to pull the price up. You can add ALL OR NONE to your order to protect against that. Like I noted in the “technical analysis” section above, there are those that will buy a couple of dollars worth of stock just to get the right open and the right close price, and they pull from those that have limit orders. The ALL OR NONE will protect you.
Any thoughts or questions? Feel free to email: firstname.lastname@example.org
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