Day traders are always looking for an edge to make more money. That is what makes them day traders. Where do they find that edge? They look for penny stocks to watch and they figure out how to profit from them.
Penny stocks naturally lead to edges because they are always on the fringe. Traditional investors eschew penny stocks and turn their nose up at such low-hanging fruit. The conventional wisdom says that penny stocks to watch are where you find all sorts of scams, corruption and dishonest dealings. But day traders do not see that. Good day traders see the potential for profit. Provided that you can manage your risk properly and be able to step back from bad trades.
Risk is inherent in any business endeavor. That is certainly true of trading penny stocks, so the key is to try to anticipate what might happen from a particular trade and guard against losing too much money. You can do that by putting a stop loss on each trade.
And you need to watch your trades closely. Always be ready to cut your losses and leave as soon as the stock starts behaving badly. There are traders out there that will leave with as little as 5-10 cents per share in profits if the stock is wavering even a little bit from what they expected to happen. Small gains and losses will not make a trader rich, but they will help to prevent the downside risk.
You need to have money to make money. So in the penny stocks game, you want to be looking for home runs in order to be profitable. But, at the same time, you need to be willing to take singles and doubles to protect yourself from losing even real money.
You only need to be right about 60% of the time to make money as a day trader. If you hit enough home runs and take the right amount of small losses it is ok to sometimes be wrong. You just need to be wrong in very small amounts.
One thing to watch out for: More than 90% of day traders lose money. So how is it possible to be profitable in that reality. Well, you must remember that those 90% are trading on instinct and trial and error. They don’t have proven strategies that they trade on. They just go out into the market and make calls based on unreliable and ever changing information.
That is way taking day trading classes and practicing is so vitally important. You can work with a site like Warrior Trading to be able to take online classes that will teach you the strategies and techniques that you need to know. And then you can work with a trading simulator in order to get screen time without risking real money and losing it. Screen time in front of the charts and online brokerages is the best way to implement those strategies and learn by doing. But it is helpful to be able to do it in a virtual environment where you are trading fake currency.