10 Tips To Turn You Into A Penny Stock Pro

Did you miss out on the incredible Dow rebound of 2009? Wondering how you can make those crazy returns you always read about? Here at OTCPicks.com we always strive to present the best information for both beginner and advanced investors. If you are ready to take your penny stock investing to the next level then take a look at our 10 quick tips:

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1 – Learn About Penny Stock Trading - You need to know what you are dealing with - just what is a penny stock? Here at OTCPicks.com we offer a clear guide explaining the definition of penny stocks. Check out the guide here.

2 - Risk. Investors have to understand risk. While it is true that you can make outrageous returns on your investments, the opposite is also true. Be sure to set up stop losses to limit any overexposure. Subscribe to our newsletter and get access to our upcoming in-depth guide explaining stop losses.

3 - Volume. Stocks with good volume are easier to get in and out of. Always look for building volume when you prepare to enter into a new position. Good buying volume can signal aggressive accumulation and can foretell a move upward.

4 - Markets. Know what market your stock is traded on. OTC markets or Pink Sheets are pretty much a free for all market where there is little to no regulation. The OTCBB (Bulletin Board) market protects investors with more regulations requiring companies to submit reports on their financials. Both markets offers distinct opportunities for the small investor to make quick profit strikes.

5 - Brokers. It is definitely wise to research around for the best brokers. Discount brokers such as Etrade, Scottrade, and Sogotrade are great places to start for beginning traders. For more advanced traders, brokerages such as Think-or-swim and Interactive Brokers may be better suited for your style of trading.

6 – Basic Chart Patterns. Know your chart patterns. There are tons of traders out there that work just off the various chart patterns. An example of chart pattern is an Ascending Triangle. Ascending triangle patterns emerge when the penny stock being charted is in the process of increasing its daily low trading price while the daily high remains static. The existence of an ascending triangle pattern most often signifies a positive trend regarding the price per share of the penny stock you are analyzing. However, it is important to note that there are exceptions to this rule. There are many, many chart patterns that can help you with your trading and buy and sell indicators that will help you determine better when to trade.

7 - Double Top and Double Bottom Patterns. Two of the more easily recognizable patterns of penny stock trading. A double top pattern aptly reflects its name. It occurs when a penny stock reaches a given high twice but falls off it each time. This creates a pattern within the chart of two "humps" both leading downward after the peak. Recognition of double tops can be mastered by even novice stock technicians, and they serve to send a powerful signal.

A double bottom is the opposite of a double top. On a chart it most often appears to resemble the letter "W." There are two valleys each forming a bottom with subsequent price recovery. It is important to analyze share volume within the context of a double bottom pattern. Ideally, one sees higher daily volumes during the upswing legs and opposed to the down trend lines.

8 - Gaps – Sometimes a stock will gap up or down at the open from the previous day’s close. You should never place a market order outside of market hours or you might get your order filled on a gap up or gap down at the open. Better to place Limit orders to ensure you get your order filled at the price you want. .

9 - Limit Orders – As mentioned in the previous tip on Gaps, you should always use limit orders when you place a trade to ensure you get your order filled at the price you desire. If you place market orders market makers can execute your trades at undesirable prices and this is especially true at prices at the open if the stock’s price gaps up or down. Limit orders eliminate surprises in placing orders.

10 – Profit - If you have a solid profit it is wise to take money off the table in many cases. Penny stocks can move up or down very quickly so never be afraid to lock in profits. Always keep your risk exposure as low as possible. Subscribe to OTCPicks.com’s newsletter and we will provide you with many opportunities to make double digit gains with our daily and weekly new trading ideas.