Trading in high volume penny stocks let’s you make substantial trades without unduly impacting the stock price. Even small trades in low volume stocks can have an effect on the share price sometimes making it difficult to fulfill your order either at the price you want or even at all.

Remember also, that as volumes increase so does market maker participation increasing competition and narrowing price spreads.

We strongly recommend you use limit orders when penny stock trading due to the often limited availability and liquidity of penny stocks.

A penny stock market maker can sell you the stock at a higher price than you want them or a lower price than you are willing to sell for. Placing a limit order protects yourself.

Limit your losses on penny stock trading to a fixed percentage you are comfortable with. We suggest somewhere between 20 and 30%.

Set a limit you are comfortable with and stick to it religiously. As soon as your limit is reached, sell the stock and move on to another target. Remember other penny stock investors will have similar limits so that once a penny stock price starts to tank you can expect a wave of selling.

Using price averaging is a good penny stock trading tip.

Whilst this is a risky trading tip it can reap rewards. Basically price (or dollar) averaging means buying more of a stock as the price falls. This will lower the average price that you pay for your total holding.

So if you hold 10000 shares that you purchased a $1 and the price drops to $0.8 you could buy another 10000 and then have 20000 shares at an average price of $0.9.

When investing in penny stocks, a good penny stock investing tip is to look for an abnormal dip in the stock price.

A penny stock’s price can dip temporarily due to a fall in performance of a similar stock or a drop in OTC market overall.

You need to look for a temporary drop and see signs of recovery. So, if the price has dropped by 30% and then increased again by 10% this can be considered a possible dip.

Buying penny stocks when they have reached a sustainable high is a good penny stock investing tip.

Most penny stocks, after reaching a 52 week high, will come under selling pressure that drives the price back down. But sometimes, often due to fundamental reasons, the stock sustains it’s high price. This in turn attracts further investors or existing investors to increase their holdings.

Over the next month we’ll be adding some penny stock investing tips.

These are fairly broad penny stock investing tips rather than actual recommendations. The idea is to give you a grounding on what to look out for when selecting the best penny stocks to trade.

Buy Low and Sell High

Well, that one is obvious! Yes, of course it is, it’s every investor’s goal but it has a slightly different meaning when applied to penny stock trading.