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Momentum Trading With Penny Stocks

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Momentum Trading is a type of trading strategy that investors use to gain profits from hot penny stocks that are moving upward quickly with high volume.  Penny Stocks being highly volatile are often subject to momentum trading.  Penny stocks often gain momentum from breaking press releases, rumors, recent filings, and promotion.

Big name stock promotion sites such as PennyStockLocks, StockRockandRoll, StockLockandLoad, and StockBomb often send out alerts on hot penny stocks to their members. The buzz created by these sites will often send the penny stock’s price soaring. For example, when we alerted hot penny stock RCYT the volume created from out alert resulted in serious momentum  throughout the day for RCYT with some of our members receiving profits of +5400%.

Penny Stock Momentum should be confirmed by the trader before investing. Some ways to confirm the momentum of a penny stock are by watching the penny stocks trading activity, verifying that it is trading on higher than average volume, comparing the movement against that of the market in general, and Level 2 quotes and charts. Some technical indicators that can be used to show building momentum are the momentum indicator, RSI, MACD, and OBV. For more information on these indicators visit ChartSchool.

Once the investor confirms the penny stock’s momentum the penny stock should be bought at the best possible asking price. It is not recommended to “chase” a penny stock as you may not often get it at the price you were looking for. A strict entry and exit price should be defined before investing in penny stocks. Once the momentum penny stock is bought investors should be glued to their computers checking for any news or activity which may affect the penny stocks momentum. Level 2 quotes can be a great indicator on momentum. When the offers on the ask begin to pile up, or the bids are not coming in as strong as they were before that is usually a strong indication that it is time to sell and to lock in any profits that you have made.

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