To begin buying penny stocks, I exhort you to first lay down a vivid understanding of the essential tactics utilized by knowledgeable penny stock traders and practice those techniques in paper trading (practice trading without money).

As you arrive at an understanding of the fiscal dangers surrounding penny stocks, you must master the primary tactics exercised by penny stock investors. I will delineate to you both the long play and the short play. You should exercise these strategies long before you connect a real bank account with a brokerage account.

In penny stock terms, a long play is like investing in a growth stock, but you’re buying that growth stock really early before a whole lot of history or data is available for it. 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 techniques will be utilized in so much as to trade penny stocks online in general but only short plays will be employed in day trading penny stocks.

Short plays in penny stock trading are a more adventurous endeavor and are more explicitly for the day trading penny stock dealers. Short plays involved extensive pattern analysis to determine how a stock channels. Channeling means watching for the pattern of high points and low points in a stock’s volatile behavior. Then once you become confident you have determined its pattern, a bold penny stock trader buys at the low side of the channel and sells at the high side.

With penny stocks, this can be particularly risky for two reasons: there is an abundance of securities fraud occurring in penny stocks and two, penny stocks lack liquidity. Thus they will be hard to trade away fast, so you buy that penny stock hoping to quickly dump it but then you can’t get rid of all your shares before it drops down in value again.

Please be responsible and reasonable when you evaluate penny stock data obtained on the Web. If you really want to succeed with penny stock trading, then you need to exercise an extra dose of skepticism and caution when assessing data on a penny stock, especially if you intend to day trade penny stock.

While it is quite viable to gain good money with penny stocks, do not low-ball the measure of risk involved and do not buy penny stocks without doing your due diligence.