Penny Stock Day Trading Information

Penny stock day trading information you must have before you begin day trading penny stocks. Things you must know to day trade penny stock successfully. How to recognize top day trading penny stocks.

Many small investors think they can day trade penny stock shares with an account balance of less than $10,000.

This is not true.

Day trading penny stocks requires much more capital than this because of the day trading rules set in place by the Securities Exchange Commission or SEC.There is a day trading margin requirement. Which means that there is a minimum account balance that the SEC requires day traders to maintain. This amount is $25,000 and it applies to penny stock day trading too.

What if you don't have this much?

The SEC will allow you to make 3 "round trips" (a buy followed by a sell within the same trading session) in a running 5 day period. If you make more than 3 day trades in 5 days, your trading account will be coded for pattern day trading and the minimum margin requirement will apply.

This seems easy enough to avoid until you start trying to do it.

Say you have made the limit of 3 day trades this week and it is only Wednesday.

You see the perfect set up.

You really want to buy this penny stock today before the price rises and you miss out on a huge gain.

So you place a limit order to buy and hope for the best. A few minutes later your order fills. You are joyous! Your joy turns to panic a couple of hours later when the price suddenly falls, triggering your automatic stop and pushing you over the 3 round trip limit.

This happens. It has happened to me.

If you don't want to or cannot keep at least $25,000 in your trading account, swing trading penny stocks might be a better option than day trading them.

If you are still interested in day penny stock trading, I'll move on to the how of it.

The most important thing is picking the right penny stocks to trade.

How to Find Top Day Trading Penny Stocks

Usually, when you are buying penny stocks, the first thing you must do is calculate the company's cash flow. This is because the biggest risk in a penny stock trade is the risk of the penny stock company going bankrupt while you are holding its shares and leaving you with a total loss.

In penny stock day trading insolvency risk is secondary to volatility risk. The risk that the share price will suddenly reverse, forcing you to sell your position at a loss.

If this should happen, you need to be able to sell your shares quickly in order to preserve as much of your trading capital as possible.

You may not be able to do this if the trading volume is too thin in the penny stock you are trading.What constitutes high trading volume?

This depends on how many shares you are trying to move, but a good rule of thumb is not to trade penny stocks which trade fewer than 150,000 shares per day. Though, 1,000,000 shares per session is a whole lot better.

You can find this information by pulling up a stock chart. Pay particular attention to the past week.

Pennies often trade on high volume for short periods of time and then return to low volume when investors temporarily lose interest.

Day trading penny stock is a good way to get in and out with a fist full of money while interest is high.

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