4. An Entry and Exit Plan
Penny stocks are volatile. They will quickly move up and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range daily. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you’re out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, it’s usually best to listen.
If you planned to sell at $0.12 and it jumps to $0.13, either take the 30% gain or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.