A few months back Tech spoke to me about potential of trading sub 10c stocks. I would like to share my thoughts.
No doubt this is a more speculative/volatile trading approach, and thus I am devoting a smaller portion of capital to it. This is no 'get rich quick' scheme but rather an interesting approach which can achieve high RR returns.
First of all, the key is to be able to identify setups. I may go into this in some more detail another time. I have become good at identifying these setups. In a nutshell they involve scanning for ultra high volume. The initial setup aside, there are a few benefits of this trading approach:
1) Getting in sub 10c, you can take trades in 0.001 increments, rather than 0.005
2) Because the percentage gap between entry and exit is larger than that of a >$5 stock, you are able to take a much smaller position yet still have much larger R:R potential (this leads to good opportunity cost of capital). This allows you to hold more positions, using up less capital.
3) Because of the high RR potential you only need a small accuracy rate to maintain a good profit.
4) You can sit on these for a while, trailing the stops loosely and you might happen to catch a life-changer in the process.
Caution: Don't neglect risk management. Try and get stops to breakeven asap. Still implement a trailing stop to ensure you don't give back all open profit!
I may even post potential setups in this thread as I identify them.