How do investors make penny stocks fortunes ? Well, it’s not that easy. It’s human nature to think that each and every time that we are about to hit a home run when we purchase a penny stock, but it’s not that simple. The main reason is because human nature takes over and every stock seems to be the best stock when it’s purchased. It doesn’t matter if it’s a penny stock or a blue chip.
Penny stocks fortunes are made by few, but those who do it use three simple rules. They cut there losses, scale out of the positions and let the last piece of the position run.
Cutting your losses especially with volatile hot penny stocks is easier said than done, but the key to playing this game is to live to fight another day after you are stuck in a loser. For instance, if you invest 10k in a penny stock, set some sort of downside limit. To some it may be 2k, and for those who are more liquid it might be little more. This strategy will allow you buy the next idea and not be wiped out by a losing trade. For instance, how many people continually averaged down in stocks like Washington Mutual (WAMUQ.PK) and Spongetech (SPNGQ.PK) ? Only to be almost wiped out. The only people who made money on these names were penny stock scalpers, not longer term investors looking for penny stocks fortunes.
The scaling out part of the strategy is key in seeking penny stocks fortunes. In as few words as possible, take positions of in 1/3′s. If you buy 3k shares, sell 1k when you see a slight profit, then sell the next third on the next move higher. Lastly, hold the final piece for the home run price, but use a mental stop at your initial entry price. This allows you to scalp and be long term at the same time. It also allows you to play the last profitable piece of a position with little risk.
Remember everyone wants to be greedy, it’s natural. However, the key is to live another day. Successful investors don’t need to hit 70% of their trades. They just need to cut losses short and let the winners run until the fundamentals change.
Also look for more market reports, IPO news and hot penny stock alerts. Remember, penny stocks fortunes are usually not made by luck.
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