How To Swing Trade Penny Stocks
I want to go over a simple strategy to Swing Trade Stock Picks. There are tons of things you should know about swing trading because timing is everything when you are swing trading and you are trying to play technicals to profit in a small time window. Swing trade is different than day trading since plays are usually only left open from 1-4 days. Some people even keep their trades open for as long as a week.
1.) What the market is doing is 75% of your decision.
This is the most critical element when it comes to swing trading. If the market is trending higher then you want to trade breakout stocks. Try to find stocks that have been trading in a recent channel. If the market is oversold then you want to find a stock that is green on a red day, this implies it has strength since it is trading against the market, in hope that the market is green the following day and the move the stock has made will be super charged. There are a ton of elements that go into this and this is actually an entire lesson within itself, but always try to trade with the market. If the market is overbought and going red at the end of the day you want to find a stock that either has a fresh trend line break, is very overbought, or is in a downtrend to play the market correction.
2.) Try to choose Penny Stocks That are above $1.00
It is very rare that you can swing trade penny stocks that are priced under $1.00 since there is usually no underlying trend and shorting them is dangerous since penny stock scams are so common. Shorting stocks is the only way you can lose more than 100% of your investment which is why shorting penny stocks is very dangerous. Find stocks with some value, decent balance sheet, and decent sector. Obviously you are not going to find too many penny stocks with great everything or else they would not be $1.00 to begin with. Look for stocks that have the macd line above the 0 line which would imply the overall price action is bullish. The best thing to look for is a stock that is trending up and is touching the trend line to the upside to time your entry. You my not always find this in stocks that are between $1,00 and $5.00, which is considered a Penny Stock in America, but you can always look because they are out there. If you can’t find a trending stock then look for a stock that has made a huge run up and has been caught in a channel, follow that stock and enter it .01 cent above the high of that channel and trade the breakout. If the market is trending higher you should be able to catch a 3-4 day swing trade and make some money.
3.) Swing Trade Reversals Only when the market is reversing
This goes back to rule #1 but I want to go over this in detail since Penny Stocks are different than regular stocks. You must understand there are not many price targets on penny stocks so reversals are purely technical and usually only good for the day trader. On Large Cap Stocks you can usually bust out a 3 – 4 day swing trade when the down trend line is broken, but since there is little to no actual value in most penny stocks the down trend line could be broken to the upside but the stock will trade sideways the days following the break in the trend line so there is no money to be made.
4.) Entry is Everything
Obviously you want to try and time your entry on a fresh breakout, fresh green day, fresh move higher by the market or a fresh touch on the trend line if you are long or a fresh break on the trend line if you are short. I try to find stocks with a fresh green day, so the previous day was either a doji or a red day at the bottom right of the trough. This will give you the opportunity for more profit since trending stocks usually string 3-4 green days in a row. The best time to enter a swing trade is 2:00et. This way you will hopefully get a boost during power hour and get a nice solid move the following morning.
5.) Exiting strategies
Entering is the easy part… Now let’s talk about when you should exit. There are multiple strategies for exiting swing trades and I want to discuss a couple with you. First you can use the 60 minute MACD or look for convergence on your daily MACD if you are in a swing trade. If you use the 60 minute MACD you can wait for the MACD to cross which will usually take 1-3 days and then lock in profits at that point. You can take profits on the first red day or after the left side of the trough appears to be formed. You always want to set your stops according to your trading plan but you have to give them enough room to breathe since these trades are designed to be open from 1-4 days.
For the ultimate Swing Trade Stock Picks you should check out picksthatmakecents.com. We do all of the above work for you and all you have to do is make money! There are several things we did not discuss but this should give you a general idea of what swing trading is all about.
Access vital information in the sphere of retirement investing – please make sure to go through the publication. The times have come when proper information is really only one click of your mouse, use this possibility.
Mail this post
?>