Wednesday, March 23, 2011

True Penny stocks vs Low Priced Real companies vs Low Priced Gold and Silvers

This post is about the difference between the way the above mentioned type of stocks trend intra day on trend days. If you understand the differences then this will make your life a whole lot easier in terms of knowing when to enter, how tight to set stops losses and knowing when to exit your position.


PENNY STOCKS


These generally have morning spike, sideways movement in the middle of the day then evening spike as follows. So afternoon break outs with volume confirmation are the best way to enter these stocks with stop loss below intra day support while selling into exhaustion in the morning spike is the best means of exiting. Here are some recent examples to show you what they usually look like (including $CHGS which I bought at $2.60 but had to sell early @ $3.35 pre-market due to a meeting at work; other wise I'm sure I would have gotten $4.00+ in this morning's spike instead):






REAL COMPANIES


These are easy to enter and to hold onto. However, break outs to new highs are not as clean as in penny stocks. Because of this you can be more patient with entries and exits in real companies and use passive orders i.e. buy the bid/sell the offer where as with pennies most often you have to pay the offer or hit the bid as when these start to move they rarely look back! Trend days in real companies are generally characterized by a stair stepping pattern. So it is best to buy these stock on dips or off consolidations with stop losses below the intra day swing low/support. Because of this exiting them is also the same. Wait for them to violate an intra day swing low or intra day support level to take profits.




Can you see the difference so far? Can you see the implications that this can have on your trading if you're an intra day trader?

GOLD AND SILVER STOCKS


These stocks are very unique in the way they trend on trend days. Its almost as if they just move up/down in a straight line! They are very hard to explain but easy to trade. Just have a look at a few recent examples for yourself:



Just thought I would share this with you. This information will lead you to getting better entries/exits, missing less trades and holding onto trades that are working for longer! Hope you apply it to your own trading...Good luck and good trading!

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