Penny Stock Trading: How to Trade Promoted Stocks

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If you are involved in penny stock trading in any way, then you probably understand some of the basics of promoted stocks. These are stocks that newsletters promote in exchange for compensation from either a third party invested in the stock or the company itself. These sorts of stocks can be dangerous and tricky and may cause you some problems if you don't manage things carefully. Here are some strategies to help prevent you from losing profits.

You need to be aware that these stocks often move with a large andgenerator sri lanka unnatural pattern of hype. This means they have a tendency to spike upwards and create momentum. This momentum is often times sudden and can be quickly reversed. You have to learn to either capture this momentum in a long position and take advantage of it or wait until the hype has hit critical mass and go short on the stock.

Speaking of which, shorting is extremely effective in penny stock trading. These stocks are more often going down than up in a much more predictable manner. You know when a stock that is essentially worthless has suddenly doubled in price that it is a good sign the stock is going to drop back down soon. This is actually pretty easy to predict compared to predicting what stock will go up like crazy.

Just make sure you are doing your own research on any promotion that is sent out to you. A lot of penny stock newsletters send out bad data to their subscribers to manipulate share value. Do some of your own research to confirm any of the hype or research being sent to you in order to make sure it is good. Otherwise, you could end up in a situation in which you are getting hurt from this sort of research.