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As an ex-daytrader, I would advise you to shy away from penny stocks. Some daytraders I knew used to make piles of cash trading NASDAQ-listed penny stocks by duping other market participants (often program traders) into trading with them. They would net minuscule losses on each trade, but easily make up for this on by earning liquidity credits. The ECNs (Electronic communication Networks) eventually clued in that their customers (again, often program traders) were being royally ripped off paying liquidity fees far in excess of the price of the penny stock traded; as such they stopped paying liquidity credits on penny stocks, and the trading volume (and market depth) dried up overnight. Also, the SEC instituted Reg NMS, which made it illegal/impossible to cross the market (placing offers below the best bid or placing bids above the best offer) under normal circumstances. Now it is incredibly difficult to make much money trading penny stocks.

There are basically two strategies for daytrading The easiest (and least sexy) way to make money trading is to do spread trades, effectively market making. On most widely traded stocks, the spread between the bid and offer is one cent. So if you place orders at the bid and offer prices, and other participants trade with you, you will make the one cent spread and earn liquidity credits in the process (though not all exchanges offer these, and your broker may not pay them, even though they should). Most of the traders I knew didn't like this strategy because it was tedious, and it tended to work best on cheap stocks that didn't go anywhere. Penny stocks have a minimum spread of 1/100th of a cent, so they are not very good for spread trading.

A more popular strategy is the follow the intra-day trends in the a stock's price and trade using technical indicators. There are books about technical trading all over the place; I'm sure you can find one. Basically, you get into a long position when the trend is upward, and get a short position when the trend is downward. You then ride the trend until you've made enough profit, or until the market turns around and takes all your profit away. Sound easy? It's not. Reading up on technical analysis only takes you so far. Until you have to look at a chart and level two screen at the same time, and make the decision to jump in or bail out, it's all theoretical. Anyways, getting back to my original point, penny stocks don't really go anywhere and there is no volume, so they are not good for trend trading. Trend trading is better done on stocks priced higher than $10.

The only real way to learn trading is go in and do it. When you start out, you will lose money. That is the price of gaining experience. I recall hearing an anecdote saying that 90% of new traders quit trading in their first year. I don't know if it true, but I know that in the end, I was just another statistic. Oh, and if I haven't already made it clear, stay away from penny stocks!
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