Knowing how to read penny stock charts effectively is important when day trading. We are huge proponents of always having a chart of the S&P or futures up while trading, so that you can be aware of what's happening in the overall markets. Penny stocks move with the overally markets. We explain and show you how to use an S&P chart while day trading and its benefits in this video.
Knowing how to read penny stock charts the most important part of trading penny stocks. Penny stock trading is risky so stick to the charts because the charts don’t lie.
The penny stock sector is filled with manipulators and pumpers. Hence the risk in trading them. Penny stocks are also attractive to traders, especially new ones. They’re cheap to buy and promise big rewards.
In this case, reading the charts before placing as trade is really important. You may hear people say the charts don’t matter. That is unequivocally not true. Read our post on how to read stock charts for beginners.
The importance of penny stock charts is in the patterns and the technicals. The market is a tug of war between buyers and sellers. This war forms candlesticks patterns.
These patterns form support and resistance along with the individual candlesticks. Each candlestick by itself also tells a story. Hence the importance of knowing candlesticks.
Candlesticks are the foundation of trading. Without them, technical indicators don’t mean anything. Learning how to read candlesticks and patterns will save you from the manipulators in the penny stock game.
A penny stock is defined as any stock $5 and under. Although a lot of people think of them cheaper than that. The penny stock charts of the larger dollar amounts are probably going to be the easiest to read.
Penny stock charts are made up of candlesticks. Each candlestick tells a story as well as form support and resistance. Bullish candlesticks and bearish candlesticks are easy to understand. Price is going up or going down.
What about doji candlesticks? Those show indecision. There’s also different kinds of doji candles that can give you different information. If you saw a doji forming on the daily chart of a penny stock, how would you trade it?
The real bodies and wicks of candlesticks form key levels of support and resistance. Support and resistance is another foundational aspect of trading.
They are levels every single trader pays attention to. If someone is telling you it doesn’t matter in penny stocks, you should take a good hard look as to why they’re saying that.
Candlesticks group together to form patterns. Patterns give direction, whether continuation for reversal. For instance, someone is telling you to buy XYZ stock because it’s going to the moon but there are clear head and shoulders patterns.
That is known as an F you pattern and for good reason. You’re probably about to lose your money if you take that trade. Patterns are a safe guard against pumpers and manipulators.
Penny stock trading strategies should include trading patterns. The charts don’t lie. Whenever someone tells you a stock is going to the moon, look at the charts.
Who wouldn’t want to get on the ground floor of something big and make a ton of money? Everyone would but how realistic is it? Not very.
Trade the patterns and you’ll save your brokerage account. Take our candlesticks charting course to learn how to read candles and patterns.
You can use technical analysis to trade penny stock charts in conjunction with candlesticks and patterns. Moving average crossovers can give you buy and sell signals as well as acting as support and resistance.
Moving average lines provide equilibrium t0 stocks. If price moves away from them, they’re going to come back. Use them as guides to get into a trade. The closer price is to the moving average at the entry of a trade, the better.
Everything is used as a tool to help you make the best trades. Sometimes trades go against you. However, using the tools at your disposal keep you from making trades where you’ve guessed; as well as going off the recommendation of another person.
Everything else you’ve read up to this point proves why penny stock charts matter. The sector is manipulated and pumped. Never listen to the success story of someone else.
In the penny stock sector there are a lot of success stories of how people became millionaires. That may be true but that is the exception not the norm.
If you get into penny stock trading to get rich quick then you’re probably going to fail. Trading is hard and takes time, practice and stock market training. Penny stock charts are there to be your guide.
Then you’re not getting caught up in the success story of someone else. You’re trading smart and that is a success story in and of itself.
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