Tips to Remember When Shorting Penny Stock
Summary: Shorting penny stocks means you look for overpriced stocks and wait for them until their prices go down. Usually, those stocks which trade at $0.25 or above are considered best for short selling. In this entire process, you have to be quite careful and patient. You have to do a thorough market research along with tracking stock activity. You can take help of the online trading screeners for an easy experience.
Several over-the-counter companies get delisted from the main indexes either because they are new and small or on the verge of bankruptcy. Such scenario presents great opportunities for investors to consider shorting penny stock as they have to wait for the prices to hit the low and reap benefits. In fact, there are a few recognized traders who have earned a lot of money adopting this technique. Nevertheless before you opt for this, it's important for you to chalk out basic strategies for penny stock trading as the risks are greater here.
In order to start this activity, you first need to find with your broker if he/she offers such services. The process is simple, but you need to follow certain rules. Some discount brokers offer their clients the option of shorting stocks. However, they might offer you limited choices by giving short selling permission for hot penny stocks only. If you are looking for varieties, it will be better to consider specialized trading firms. For this, you may be required to dish out higher service charges and the number of your trades can also be limited. Another thing is that you have to start using online tools to be updated about the latest market and stock activities.
While shorting, you are basically looking for overpriced stocks and waiting for the decline in their prices. Due to this, your chances of losing increases to a great deal, making your winning opportunities quite thin. Therefore to achieve success in this type of trading, you have to research your stocks well. At the same time, you also need to be careful with speculators who bid up the stock prices to drive profits. You can take care of all these by following basic rules of short sales.
€ While shorting the penny stocks, focus on those companies which are trading at $0.25 or above. Since by every chance speculators may try to manipulate the prices, this range will keep you in safer zone.
€ Check the previous performance of your stock and accordingly, decide your margins.
€ See which stocks act on false publicity, going up in the radar. Wait for the time when their prices skyrocket.
€ Consider subscribing to stock alert services to get regular updates and tips on buying and selling the penny stocks. Usually, these updates are sent via emails or SMS.
€ For shorting penny stocks, you need to hold a margin account with a brokerage firm. Go through its rules and regulations first before you commit.
Several over-the-counter companies get delisted from the main indexes either because they are new and small or on the verge of bankruptcy. Such scenario presents great opportunities for investors to consider shorting penny stock as they have to wait for the prices to hit the low and reap benefits. In fact, there are a few recognized traders who have earned a lot of money adopting this technique. Nevertheless before you opt for this, it's important for you to chalk out basic strategies for penny stock trading as the risks are greater here.
In order to start this activity, you first need to find with your broker if he/she offers such services. The process is simple, but you need to follow certain rules. Some discount brokers offer their clients the option of shorting stocks. However, they might offer you limited choices by giving short selling permission for hot penny stocks only. If you are looking for varieties, it will be better to consider specialized trading firms. For this, you may be required to dish out higher service charges and the number of your trades can also be limited. Another thing is that you have to start using online tools to be updated about the latest market and stock activities.
While shorting, you are basically looking for overpriced stocks and waiting for the decline in their prices. Due to this, your chances of losing increases to a great deal, making your winning opportunities quite thin. Therefore to achieve success in this type of trading, you have to research your stocks well. At the same time, you also need to be careful with speculators who bid up the stock prices to drive profits. You can take care of all these by following basic rules of short sales.
€ While shorting the penny stocks, focus on those companies which are trading at $0.25 or above. Since by every chance speculators may try to manipulate the prices, this range will keep you in safer zone.
€ Check the previous performance of your stock and accordingly, decide your margins.
€ See which stocks act on false publicity, going up in the radar. Wait for the time when their prices skyrocket.
€ Consider subscribing to stock alert services to get regular updates and tips on buying and selling the penny stocks. Usually, these updates are sent via emails or SMS.
€ For shorting penny stocks, you need to hold a margin account with a brokerage firm. Go through its rules and regulations first before you commit.
