How to avoid blowing up account in penny stock trading

It will be helpful to know the habits of traders, especially short sellers on penny stocks. When there hasn’t been any runners for a while (boring market), short sellers are usually on the edge and hungry to short sell stocks. So if they see an opportunity arising, we can be assured it would be heavily shorted.

So given this knowledge expect for short sellers to move in on almost any peaks generally speaking. However if for some reason the stock dips then come back up, short sellers that haven’t closed will have to cover so this will further increase the up movement of the stock especially for low float stocks. When the supply is less and the demand is more, the stock will shoot up really quickly. At the same time when it is trading on a really low volume like 50k, 100k, 200k on a 1 min chart for a stock running up 500%. In this case try to avoid going on the long side and wait for it to reverse so it can be shorted.

See chart for ticker SEC for massive volume causing a spike in the stock. It was a multi-day runner so there was opportunity to go long and for shorting. Note however for penny stocks, select brokers need to be chosen in order to borrow stocks to short.

Also for hot market, when it has already transact 20 to 40 million, that means the action has already taken place for the most part and so should wait for the drop to short. Patience is key. Why rush to loose money.

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