A Business Approach To Trading Hot Penny Stocks

Most successful traders have a business approach when it comes to describing their trading of hot penny stocks. The objective is to try to extract the most money out of the market, while keeping risk exposure relatively low. It’s not about gambling or taking shots, hoping to rake in that big pay day.

Now, if you’re unsure of what having this business approach means, here are some things you should consider:

 

Infrastructure Expenses

This will include any news service, chat room, research, execution platform, or any other trading tool that you’ll be using to generate and execute trade ideas when hunting hot penny stocks.

 

Operating Expenses

This would include your trading fees and commissions.

One thing that should really stick out is that trading is not free. You don’t just need a laptop like some might want you to believe. You’ll need some tools, and the good ones cost money.

 

How much capital does your business have?

If you’ve got a $10,000 trading account, and your infrastructure expenses are running you $500 a month, that means you have to make 5% a month (after fees and commissions). From a business perspective, that is a difficult position to place yourself in. With that said, you want to put yourself in a position to win, if your overhead is too high then you’re starting from a competitive disadvantage when trading hot penny stocks.

Are your goals realistic?

Again, let’s say you have a trading account of $10,000, is it realistic to have a goal of making $3,000 a month?

Probably not.

Your goals should be realistic and process oriented. Instead of focusing on the dollar amount you want to make, put your attention on increasing your share size. The more shares you trade, the higher your profits and losses will be. Focus on your mechanics and work on raising your shares up.

 

What else?

Like any good business, you want to know how efficient your operation is running. How can you translate that to trading terms? Well, you can do that by keeping records.

For example, journaling your daily trades of hot penny stocks, and analyzing each trade one by one. You’ll eventually find out which types of trades generate the most profits and which ones you struggle with. Ultimately, you want to put your capital into your best ideas, the ones that have the chance to bring you back the highest return and within reasonable risk measures.

You can even scrutinize which times of day seem to be the most and least effective for you. Some businesses might close shop early because the number of customers they receive at a later time doesn’t make it worth their while to keep the lights on and have expenses running. Find out your best hours of trading and start utilizing your time more wisely.

The reason why most business and traders fail, for that sake, is because they don’t have a solid plan. Your plan should be constantly reviewed and updated. Just like the business world, trading changes as well. Be prepared for those changes and make a plan you can execute successfully when trading hot penny stocks.