penny stock trading strategies
Penny stock trading strategies can basically be based on similar strategies as the strategies for more regular type of stocks are.
This is because the same rules of valuing companies apply to penny stock companies as do for companies not defined as penny stock companies.
However, penny stocks are considered very volatile stocks, which has made some investors to use options-based pricing models to value them.
Available Penny Stock Trading Strategies
There are two major trading strategies around, the other based on fundamental analysis, the other on technical analysis.
As for the first, fundamental analysis uses financial, political and economic information for decisions on trading calls.
Meanwhile, technical analysis uses charts, mathematical analysis, trend, support and resistance lines and so on.
Under these two main strategy lines there are hundreds of different strategies to choose from. Also, many use a combination of the two main strategies.
If you choose fundamental analysis exclusively, you have to follow current breaking news, indicators (including indicators such as balance sheet items of the company and profit & loss statement), as well as political trends to make money from penny stocks.
Using fundamental analysis for trading calls requires deep understanding how the markets work and how the markets will react to news.
If you choose technical analysis, you will have to learn a technical analysis trading style that suits you best.
There are tens of them around, ranging from artistic (chart reading) to advanced mathematical strategies.
The commercial packages for penny stock trading strategies commonly use technical analysis.
The systems may be sold as black box solutions (where the rules of the strategy are not revealed to the purchaser), or as a system where the rules are known (such as systems sold in a book format).
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