Few important tips for penny stock day traders

Day trading the stock market consists of the swift buying and selling of stocks on a day-to-day basis. This scheme is used to assure quick profits from the repeated changes in stock values, minute to minute, second to second. It is rare that a day trader will continue in a trade over a night into the next day. These trades are entered and exited in a matter of minutes.

The first question that most people ask when it comes to day trading is straightforward: ‘is it necessary to sit at a computer watching the markets ALL day long in order to be a successful day trader?’ The answer is no. It’s not necessary to sit at a netbook all day long.

There are a number of factors to consider, but generally the rule of day trading is to trade when everyone else is trading. In other words, trade in the morning. As with all financial trades, day trading is risky - in fact, it’s one of the riskiest forms of trading stocks out there. The stock prices jump or fall according to the behaviour of the market, which is utterly unpredictable. Day traders buy and sell shares rapidly in the hopes of gaining profits within the moments and seconds they own those particular stocks. Simple to do in theory, harder to do in reality.

If you are limited by a small amount of capital, you may not be able to buy large number of a stock, but buying only a small amount can add to the risk of a loss. And, obviously, it is impossible to predict with certainty which stocks will result in profits and which in losses. Even the best of traders must learn to accept both outcomes. The day trading industry deals in a large variety of stocks and shares.

These examples below are not your only two available options when it comes to day trading stocks. The best way to determine which type of stock is right for you is to invest some time for careful research, a familiarity of market patterns, a robust strategy, and finally, what is probably the most important - a disciplined trading plan.

• Bullish Momentum trading - shares which are expected to continue to grow in price. These shares of companies which are on the rise and show no signs of stopping. Although penny stocks are generally cheap, they are a very risky investment for day traders. You’d be safer to go with large caps and/or mid-caps, which are much more secure and stable thanks to a premium.
• Distressed trading - company stock that has not performed well in the past periods. Day traders buy these penny stocks in the hopes of achieving profits if and when the stock rises in value. As with small caps, distressed penny stocks can be a risky choice for penny stock day traders.

It’s also important to know that in day trading, it is the number of shares rather than the value of shares that should be the focus. If you day trade, you will face losses, but even for the more expensive stocks, the loss should be marginal, because prices do not usually change to an extreme degree over the course of just one day.