One good strategy to use in penny stock investing is to allocate a certain portion of your capital to a stock you want to own. Start out by only investing 1/4 of the total amount you are prepared to commit. That way you can add to the position if the stock trades lower and take advantage of other people's weakness. This only applies to investors that are prepared to hold for at least four to six months. If you view yourself as a short term trader you must follow the short term trends.

Another good strategy in penny stock trading, particularly with thinly traded OTCBB and Pink Sheet stocks is never buy a stock at the market when it Gaps Open. A Gap occurs when a stock opens at a much higher price than it closed at the previous day. 90% of the time that stock will drop back down and fill the gap. Market Makers have been using gaps to line their pockets with money from investors for years. When market makers have market orders for a stock at the open, they will often take the stock up, fill the market orders at the higher price by shorting it to investors, and then drive the price back down. Then when they have scared enough people into selling, they cover their short and walk away with a tidy trading profit.


The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks
by Dan Holtzclaw
See details at: http://www.amazon.com/Little-Black-Book-Microcap-Investing/dp/0967475821/

The Stock Detective Investor: Beat Online Hype and Unearth the Real Stock Market Winners
by Kevin Lichtman and Lynn N. Duke
See details at: http://www.amazon.com/Stock-Detective-Investor-Unearth-Winners/dp/0471387754/


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