How To Get Started Trading Penny Stocks Step By Step | For Beginners
How To GET STARTED Trading Penny Stocks Step By Step
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Hey everyone, Tony Ivanov here and I’ve been getting a lot of questions on exactly how to get started trading penny stocks, more specifically what to start researching in order to build the proper foundation BEFORE trading penny stocks, so I put together this little video in order to give you all some guidance on how you can get started trading penny stocks!
First, we need to define exactly what “Day Trading” and “Penny stocks” is
Day Trading: The act of buying and selling a security (stock, options, bonds, futures etc) within the same trading day
Example: I buy 500 shares of ABCD at 9:30am, and sell those shares 10 minutes later
Penny Stocks: Stocks that are under per share and the market capitalization is (usually) under 0 million dollars
Example: Stock ABCD has a share price of .50 per share and has 50 million shares outstanding, this means that their market capitalization is ,000,000
Great! Now we know exactly what day trading is.. where can I start buying and selling stocks?
Don’t worry about actually DOING it yet, that’s how 90% of traders FAIL!
First you need to understand Basic Technical Analysis. Here are some key words to get you started: Candle stick charts, support, resistance, volume, level 2, float, moving averages, bollinger bands, stochastics, and vwap
Second, you need to understand the importance of risk management. We manage our risk as traders by having a risk reward ratio of at least 1:2, meaning if you’re aiming for a 10 cent per share gain, you should risk 5 cents a share.
Aiming for consistent gains
Don’t try to go for ‘home runs’ or ‘big wins’ ESPECIALLY if you’re still on a small account!
Aiming for small, consistent wins between 7%-15% will allow you to reduce your risk and grow that small account
This doesn’t mean to take advantage of huge movers when they arise, but don’t try to FORCE a huge mover
Cutting your losses QUICKLY
This is especially true for people with small accounts, you NEED to preserve the capital that you have. Stick to your risk reward and cut your loss once the price drops to your risk level.
In order to find the best penny stocks to trade, I use scanners like EquityFeed and Trade ideas to scan for stocks that are moving in pre-market on good volume (specifically dollar volume) with a low float and some sort of catalyst
Catalyst means a reason for the stock to move. This can be:
Technical (chart patterns)
Pure momentum (low floats especially)
Entire sector moving
Entire market moving