Day Trade Small Cap Shares Successfully

If you want to day trade shares this means that you will buy and sell stocks in the same day, sometimes you will hold them for the best part of the day and other times just for a couple of minutes and just about never overnight. An investor however prefers to keep stocks for a long period of time and will ride out the market fluctuations in a process known as capital appreciation. There are both pros and cons for each method.

These traders will use the intra-day volatility of these stocks to buy and sell accordingly to make money, and can often make numerous entries into the same stock over the day. Volatility is as such a requirement in order to make consistent returns! It does not matter which way the general market is trending, you will always find micro cap shares that are highly volatile and moving in an upwards trend.

Although volatility is a great thing when day trading micro cap shares it does not come without its dangers because as quickly as a stock moves up, it can turn around even faster and you end up with a loss.If you are new and make a lot of these mistakes early on and have too much of your capital invested you can end up with losing all your money very quickly. If you remember to only ever trade with money that you can afford to lose you must still proceed with caution when starting to day trade penny shares as the appeal of making large profits comes with it a much bigger risk.

Be cautious of becoming caught up in what is known in the industry as a 'pump and dump' scenario which often occurs to those penny shares you may have seen advertised in your spam emails, in which investors rush into to buy the share quickly and then sell off at a profit and if you're not quick enough you can end up with a substantial loss. The end result is you are left holding stocks in a company that is worthless and you are now at a loss.

You should set aside the majority of your investment money when looking to day trade penny stocks and invest it into more established stocks or other more stable investment options and only trade with a small amount, especially if you are just starting out. You should base that decision by looking at how much of your investment can you afford to lose.

In order to begin your day trading career you should set yourself up with an online brokerage account, preferably one that will give you live market feed (you may have to pay a subscription for this but the last thing you want to be doing is making decisions on data that is 20 minutes old!) You then place an order and once filled they will charge you a small brokerage fee.