Swing Trading Penny Stocks
Many investors and traders have a certain trading pattern that works best for them and seldom do they veer from the course that makes them the most comfortable and stay within their tolerance levels. Penny stock traders and investors rarely day trade since day trading is not very suitable for this form of trading. Penny stocks are better suited for swing trading for investors that are looking for a short term time horizon for return on investment. Day trading a penny stock can be profitable in the smaller markets but larger gains can be made in a few days to a few weeks swing trading rather than opening and closing the trade within one day.
Penny stocks usually move on a relevant and recent news event. If the news has great impact for the company and generates revenues, the move up can be extended for a period of days or weeks. Swing trading also works best for investors that do not have the $25,000 minimum required by the NASD for pattern day trading accounts with holding overnight eliminating the pattern day trading rule. Also, as a general rule, most penny stocks that have a relevant volume generating news event, usually but not always have a three day upward move and pulling back on the third day before the closing of the market as short term investors take profits. Swing trading should be considered as a methodology for all penny stock investors as a way to increase trading profits in the smaller markets.