Penny Stocks

Technical Analysis Guide To Invest In Penny Stocks

Fri Feb 26 2021 17:36
Many traders are out there who get a good return on investment through penny stocks. Are you also ready to get a huge profit out of these penny stocks? Well, here you will have to go through technical analysis. It is the most bothersome part for the traders. They don't want to involve themselves in any kind of technical analysis. The newcomers are always looking for an easy way to find penny stocks for their trading account. But are you sure that kind of stock is available? 

 Technical analysis is very important for all the traders out there. From penny stock traders to intraday traders or blue-chip stock market traders. If you are not conducting any technical analysis, then you will find it very hard to succeed.  

We will dive deep into Penny Stocks 

Today here we will talk about a technical analysis guide to invest in penny stocks. This guide will tell you how to find penny stocks, along with this, it will be guiding you on how to analyze them. It will help you to find the best stocks and how to trade penny stocks based on various technical sources of information. 

From trading charts to analysis reports, everything will be there in this post. If you find this post more interesting and useful, then never hesitate to share it with other traders in the community. 

Technical Analysis And Its Importance 

The first question is, how much importance does technical analysis have in penny stock trading? Is it easy to trade penny stocks without technical analysis? Or is it easy to trade penny stocks with technical analysis? What is reality? 

Of Course, there are penny stock traders who will claim that penny stock trading is very easy and you don't need any kind of technical analysis for it. But more than such traders, some traders will tell you that technical analysis is very important in penny stock trading. 

What Is Technical Analysis For Penny Stock Traders? 

It is similar for the penny stock traders as it is for the other stock market traders. With technical analysis you try to find out various price history, market history, stock company details and more than it, you try to find out the trend and price forecasts for a stock or a group of stocks. 

Technical analysis has the same meaning in any kind of trading. But, the trading methods using technical analysis can be different for different markets. Don't worry if you don't know how to trade penny stocks using technical analysis. Because here in this post we will explain everything to you in simple words. 

Importance Of Technical Analysis 

Following are some important features of technical analysis. You are using technical analysis for penny stock trading or blue-chip stock trading, you will get these features all the time. 

#1. Keeps You Informed 

The first and important feature of technical analysis is that it keeps you informed all the time. You are never lost in the market if you have technically analyzed a group of stocks or the complete market. So your vision in the market will be straight and clear. 

#2. Be In Discipline 

Yes, sometimes you need to get out of discipline to make decisions that are not pre-planned. But it doesn't mean that you cannot be in the discipline while trading penny stocks. 

Technically analyzed trading plan will keep you disciplined. And you know how important discipline is for your trading career. 

#3. No Shocking Changes 

There will be so many price fluctuations in the market and new traders get a shock when they find a price fluctuation or change in the market. But if you have done your technical analysis of the market, then you will find that it is too convenient for you to trade. 

Technical Analysis Strategies 

There are hundreds of technical analysis strategies used by stock market traders globally. But we are going to talk about the technical analysis strategies useful for penny stock traders only. So following are some common and most popular penny stock technical strategies. 

#1. Bottoming Out Pattern 

This type of pattern is identified using technical analysis for penny stocks that are coming up. Most of the time these types of penny stocks are under the trend line. 

But after a few months of downward movement, there are chances that they will rise a little bit in a couple of weeks. This strategy is used by penny stock traders. 

#2. Price Dips 

It is a very quick technical analysis strategy and it is not recommended for new traders. If you are not that expert, you cannot use this strategy to get a good return on investment in a short period through penny stocks. 

In this, you will see that traders will make money out of small price dips or jumps in penny stocks. 

#3. Share Consolidation 

Whenever there is a move or change in the shareholder lobby of a penny stock, and there is a price fluctuation above the average price, it is known as share consolidation. 

Because most of the time that kind of penny stock will move up a little bit and the new shareholder lobby is never going to sell anything. In such situations, penny stock traders make profits through these movements. 

#4. Topping Out Pattern 

If you have learned using the bottoming-out pattern, then it will be an easy thing for you to use the topping-out pattern. In this kind of movement, traders will find that penny stocks that are going high for a long time now will appear to move downward. So this pattern is also important for penny stock traders. 

#5. Gapping 

Gapping is a term used by stock traders to state the gap between the closing and opening prices of stocks. When there is a gap between these stocks, they are known as gaping stocks. It is one of the most common and simple technical analyses for penny stocks. 

In which you will be analyzing the closing price of the stock on the previous day and then comparing it with the opening price of the day on which you want to trade. 

How To Technically Analyze Penny Stocks? 

Now the question is how to technically analyze penny stocks or how to conduct technical analysis for penny stocks. There are many ways to do it, and the best method is mentioned below with a step-by-step guide. 

#1. Choose The Best Strategy 

First of all, choose the best technical analysis strategy for penny stock trading. Never try to copy someone else. You have to choose the best strategy based on your trading experience, risk tolerance, capital, etc. 

#2. Make A Trading Plan 

Now after choosing the best strategy for your penny stock trading, you have to make a trading plan for yourself. You have to include your technical analysis strategy in your trading plan. 

#3. Make A Schedule 

Whether you are a short-term trader or a long-term trader, you need a proper schedule for your trading. After making a schedule you need to stick to it. Regularly you have to analyze before investing anything in penny stocks. 


Trading penny stocks can be way easier if you have analyzed things in a technical way. Technical analysis of stocks and the market is important for all stock traders. But penny stocks can give you a huge return if you analyze them. 

There are many ways to analyze penny stocks. Some analysis strategies are used to find out the best penny stocks for your account. 

On the other side, some technical analysis is needed to trade penny stocks. You can make a trading plan with this technical analysis and get a good return on investment with penny stocks. 

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