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1. Wait until the trade comes to you, do not force the trade. 2. Traders employ strategies that result in following the move up with an exit that is activated on a pre-determined turn down for a bullish play triggers. 3. Successful Traders do not keep their eyes glued to the money. Instead they concentrate on making good trade. 4. Successful Trader emotions should be calm, comfortable with self, logical, patient, and realistic. Understanding Penny Stocks Chart The stock market can be can be very intimidating to the novice investor, especially in times of high volatility. Learning the basic skills in penny stock trading, such as how to read stock market quotes is very important. This is because once you have this basic skill; it will be a lot easier and quicker to understand the more complex areas of penny stocks trading. A penny stock chart shows the changes in the price of a particular stock. The patterns in this chart are helpful to a person who wants to make the right move, whether to buy or sell, when investing in penny stocks. A penny stock chart can relay different kinds of information. There are charts which center on the price modifications of the stock. Other charts concentrate on a specific penny stock's moving average. It is imperative to monitor and check, on a daily basis, the prices and volume charts of the penny stocks that you intend to buy and trade. You will be surprised to discover how frequently a stock trading pattern repeats itself. Studying price and volume charts that go back as far as three years ago may show vital patterns. Familiarizing yourself with the way penny stocks have been traded in the past may be beneficial as well, as this will give you a good feel of the way the stock might move in the near future. A guarantee of a pattern repeating itself is not 100% sure, but it does happen, and when it does it may mean instant profit for your investment. There are different items to look for and analyze in a penny stock chart. The support level for a penny stock points out the lowest price drop in a certain period. On the other hand, the resistance level of a penny stock is the point in the chart wherein the price is much greater than the demand. It is also important to look at the trading range of a penny stock as shown in the chart. A trading range is a price range at which the value of a penny stock remains inactive for an extensive period of time. Once the stock chart pattern goes beyond the highest point of this range, it may possibly set a new resistance level. Conversely, if it goes lower than the bottom of the price range, it is possible that the penny stock is on its way to establishing a new support level. The following steps may help to understand Penny Stock Charts 1. The volume bar The volume of the stock is indicated by two vertical lines in the charts. One is at the bottom and the other is located a bit above it. Often there is a line at the lowermost part of the chart that corresponds to the one above. The lower bar is the volume of the stocks at a given point. 2. The High and Low Value Indicator Look out for any trend lines within the penny stocks chart patterns. Trend lines may possibly designate the future prices of the penny stocks. If the trend line is going upward, it may be a sign of future growth, while decline on the other hand might signify the opposite. It is also imperative to establish a comparison trend line as it will help determine if stocks are following the market and would have nothing to do with future price indicators. 3. The Open and Close Marker Some stock trading charts have short and stout bars with a thin line inside it. This thin line is called wick or tail. This is where the name candle stick is derived. The thin line or the wick signifies the low and high values, as explained above. The fat line, which also looks like a short bar covering the thin line, indicates the open and close values. To differentiate the open from the close, the bar is shaded. If it is filled with black, the close was lower than the open, so the top of the body indicates the open and the bottom marks the close. If the body is filled with white the close was higher than the open, so the top shows the closing point and the bottom is the open. The shadows are thin lines that extend above and below the body to show the range between the days's high and low. Understanding Technical Analysis Technical analysis can be defined a security analysis to predict the future directions based on the price and data available from the past stock performance. Technical analysis employs various sophisticated models and trading rules based on price and volume transformations like RSI, Moving Average etc. Technical analysis is widely used among traders and financial professionals, and is very often used by active day traders, market makers, and pit traders. Technical analysts believe that prices trend directionally, i.e., up, down, or sideways (flat) or some combination. Technical analysts believe that investors collectively repeat the behavior of the investors that preceded them. Sector Diversification Diversification is a technique to minimize the risk by investing in multiple asset classes in a single portfolio. Multiple asset classes means different types of investment like stocks, bonds, derivatives, warrants, gold certificates and real estate. The main motive of diversification is to reduce the risk and yield a higher return compared to other portfolio that invests in one stock.  Diversification is a method to smooth out the volatility of a portfolio.                           To create a diversified portfolio various factors need to be considered: •    Time horizon •    Risk Tolerance •    Investment Goals •    Level of Investment Experience Example For example, there are two different portfolio of equivalent investment money. The first portfolio constitutes of real estate and technology stocks and the second portfolio comprises of high yield bonds, retail, technology and banking stocks. The first portfolio may provide high returns in a booming economy while create huge losses if the technology sector is in severe downturn phase. However, the second portfolio may not provide as good return as the previous portfolio in a booming economy. The second portfolio is safe and less prone to big money losses in a specific sector downturn. If the technology sector is hit badly, the retail or the banking stocks could compensate for that loss and even produce larger returns. In addition, the high yield bond is a sure way of gaining return in a diversified portfolio versus the previous one. Benefits An investor can derive benefits from a diversified portfolio only if the securities have low degree of correlation with each other. They should not be perfectly correlated to each other. Diversification is very beneficial in the long run as it minimizes both the upside and downside potential risk. Investment in different asset classes responds differently to the same market conditions. This means if one part of a diversified portfolio does weakly it can be offset by other investments that do relatively better. A diversified portfolio performs consistently under a wide range of economic conditions. A well-diversified portfolio helps to limit taxes such as capital gain tax or income tax Beta Diversification To get a better understanding of beta diversification, it is essential to understand the concept of beta. Beta is an indicator that describes the relation between the movement of a stock price to a specific market movement. A stock with a Beta of 0 indicates its price has no correlation with the market or it moves independently irrespective of the market movement. A stock with a beta of 1 or positive beta means share price is moving in line with the market. A negative beta indicates the price of stock declines as the market moves up. Therefore, negative beta implies inverse relation between the stock and market movement. Diversification is an important tool to minimize risk in a portfolio. Mixing disparate investments so that the upward movements of some securities will offset the downward movement of others during different time period creates a well-diversified portfolio. Beta diversification in a portfolio means securities that have different beta or low degree of correlation to each other. In other words, beta diversification means investment in securities whose returns do not move at the same time. Therefore, an investor should maintain a portfolio that has different beta to protect the price of various securities not to decrease at the same time period. Example For example, there are two situations, the first situation market is up and in the second situation market is down. In the first situation, some of the stocks of a particular portfolio are performing in tandem with the market and others may reflect a downward trend. In the second situation where the market is down the above securities will reflect the opposite movement. Hence, a beta diversified portfolio helps to stabilize the return in both the upward and downward movement market. Benefits •    Beta diversification helps to minimize unsystematic risk of a portfolio. •    A beta-diversified portfolio helps to gain maximum return by investing in high beta assets with low beta assets.
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