Post Number: 3087
Posted From: 22.214.171.124
|Posted on Thursday, January 07, 2021 - 8:45 am: |
There isn't a simple answer. You can skip to second paragraph if you are only looking for straight answer.It depends on individuals' risk appetite, goals and overall strategy. The most common mistake traders do with penny stocks is getting in early. I know it sounds dumb.
Big money is made by holding top runners for longer periods. For example, there are several people who traded NIO at 2. How many are holding the stock till now riding from $2. People are scared to hold penny stocks as there is no guarantee that they will make it to the big league. Big players skip the initial phase and get on the board after it gets out of the woods. So they would get in NIO at $20 after they got the all clear and ride it to 100+.
The advantage of this strategy is they can safely deploy huge capital as it is no longer a penny stock but there is still a huge potential left. and they won't panic during the days it drops 10 to 20% as they only see the final destination. But retail trader psychology won't allow to buy it at $20 as they have already traded the stock at $2. BNGO will go to 200+ in next 2 years if the product takes off or it will be stuck at 2 if it fails. When they get all clear you may have to get in at 20 but it will still be a 10 bagger.
But the million dollar question is how many will buy this at 20 when they traded at a buck. I know I still haven't answered your question but I thought this insight helps.
There are 3 ways to trade penny stocks. DayTrading, Swing trade with stop loss, total gambling. I guess I don't need to explain Daytrading. Swing trade is to take a position with an initial stop loss. If the stop loss gets hit, you keep trying until you survive the initial stop loss and get into profit zone. Once you make significant gains (such as double) you take your original investment and ride with the house money. You keep doing it for every 100% gain(of the initial investment) going forward. Gamble is you deploy significant amount of money right away that you are prepared to lose and exit after you reach your set target. So decide if you fall into 2nd or 3rd type and play accordingly.