To start buying penny stocks, you should have a strong grasp on fundamental strategies used by savvy investors and exercise these strategies through dealing in paper (trading practice with no money).

Once you understand and appreciate the perils involved in day trading penny stocks, you must then master the maneuvers utilized by savvy penny stock traders. I will delineate to you both the long play and the short play. I urge readers to practice these techniques with paper trading before you trade with real money.

A long play is just like investing in a growth stock, except you buy penny stock well before a strong history has been established for the stock’s company. A long play basically means buying a penny stock and then holding it for a long term investment. This can be very profitable if that stock goes from being well below $5 per share to being worth a couple hundred bucks per share in a few years.

Both of these penny stock tactics will be utilized in penny stock trading in general but only short plays will be utilized in day trading penny stocks.

Penny stock short plays are more for the bold-hearted day trading penny stock investors. A short play is based on meticulous charting to delineate how a stock is channeling. To understand channeling, just imagine two straight flat lines placed along the jagged line of a line chart; the lower line represents the average low values of the stock and the higher line represents the average high values with the space between representing its channel. After you’re sure you have identified a clean pattern within the stock’s shifting values, an aggressive penny stock investor will continually buy on the low point and sell on the high point.

With penny stocks, this can be particularly risky for two reasons: one, penny stocks are highly susceptible to manipulation by fraudsters and two, penny stocks lack liquidity. This means they can be hard to sell, and end up buying on the low but unable to sell it during the short time it is at its peak.

So be very careful what information you believe on the Internet. If you really want to succeed with penny stock trading, after which you must practice plenty of care and skepticism while evaluating information on any single penny stock, particularly if you plan on day trading penny stock.

While it is quite possible to earn good money through penny stocks, do not low-ball the amount of hazard involved and do not buy penny stocks without doing your due diligence.

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