Day Trade vs Swing Trade vs Long Term Investing in Penny Stocks - Tradersfly (2024)

Today we’re going to talk about penny stocks and the big question of should you day trade, swing trade, or long-term investment in penny stocks.

A lot of people wonder:

• Should I date trade penny stocks
• Should I swing trade or
• Should I do long-term investing with penny stocks

There is a big question: What should I do, and what type of trading should I do when it comes to penny stocks?

I think there’s an interesting point when it comes to trading penny stocks. And that is a lot of people who trade penny stocks are typically interested in day trading penny stocks.

But there are different types of penny stocks that you could also swing trade or invest in the long term.

What’s important that you recognize is where does it fit into your portfolio. And before we get into that, I want to remind you that we’re doing this video because we have an upcoming course called Penny Stock Profits.

If you’re serious about trading penny stocks the right way, check out this course.

We have Penny Stock Case Studies as well, where we also evaluate hundreds of different penny stocks, and I show you the breakout points, entry points, and those kinds of things.

Anyways, my point here is that most people don’t understand where penny stocks fit in their portfolios. They trade them all sorts of different ways.

When you look at a portfolio, you have to understand that for a lot of people that trade penny stocks, they’re just looking to trade these penny stocks 100% of their money.

Whereas the proper approach is to break down your capital.

If I say I have a ton of long-term investments (this could be Microsoft, McDonald’s, Starbucks, Johnson & Johnson) – this could 40 to 60% of your cash.

That means if you have $10,000, it could be $4000-$6000 somewhere around there.

Medium-term investments like swing trading or holds that are maybe 30 to 90 days or even 180 days (a little bit more medium-term) – that could be about 20% of your capital.

I’m not saying that you should use 25%. For some people, they just have long term investing and spect trades. Other people medium-term and spec trades. Some people just have long-term and medium-term.

The point is that you’re breaking apart your capital, and this is where the penny stocks fall in. In your speculative part of your trades.

If you understand this bigger picture, that is the better approach. Now you could dig deeper and ask yourself: Well, should I long-term invest some of these speculative trades, or should I hold them for a swing trade, or should I just day trade them?

Right here, when you first take this big triangle, and you look at all these different capital allocations that you could break this triangle apart on its own.

And also have a little bit of diversification. Here you could have some that are day trading speculative penny stocks.

Here you could have some swing trades, and then here you could have some long term investments in penny stocks.

But remember if you have a $10,000 portfolio and $5,000 is on the bottom of the triangle.

And let’s say $2000 or $3000 is here depending on the amount of cash. Then you’ve got about another, let’s say $2000 remaining here.

If you’re breaking things apart, you might only have about $1,000 in this area for long term investments in penny stocks. Maybe about $400 here and about $200 on day trading.

Anyways, my point being is that what you’re trying to do is allocate your cash accordingly.

The thing is if you’re trading with big numbers (let’s just multiply this by 10), all of a sudden, this could be $10,000 instead of $1,000. This could be $4,000 instead of $400. And this could be $2,000 instead of $200.

Yes, of course, the numbers can get bigger.

I’m using a $10,000 figure sum as a basic example.

What I’m trying to tell you is that you need to be very careful about how you allocate your cash. That’s because there’s a lot of different penny stocks that are great for long term investments, and some are just day trading opportunities. And others are swing trading opportunities.

The question is, are you getting sucked into some trades because you’re watching videos that maybe suck you in. Videos like I made $300 today or made $700 today.

What you need to understand is different trades, or different stocks trade a little bit differently.

This was a penny stock of around $4. The entry point was right here. This was a nice breakout. Here’s your volume. The volume looks good.

There’s your entry point. The stock continued to move and move well, and this stock moved pretty much for a whole year.

This would have been a great long-term investment play. And if you would have just day traded it, you would have just made a few pennies.

And that’s it. You would have missed out on that whole big move.

On the other hand, there are other stocks which I’m not exactly sure at this exact moment. Let’s check it out.

This just moved for a week. This stock might have just been good for a swing trade.

That’s because you have a resistance over here.

And here’s your breakout area. Could have gotten in it couple weeks. This would have been a swing trade.

The thing is that different stocks trade differently. And you have to know that and recognize that.

Here, in this case, the stock is similar nice volume. Hold it for a couple of weeks right there because that’s a daily bar.

And then the stock now is selling off. And that’s it. It’s done. This one again is also a swing trade.

Other stocks may only be just a simple day trading opportunity. It just depends on the type of stock and the momentum that’s there and what you’re looking to do with it in your portfolio. And that’s the bigger picture.

What are you doing with it in your portfolio?

You have to realize and recognize that. That’s because as you get into the speculative part of your portfolio, zoom in even further and break it apart.

Are you doing more day trading?

Are you doing some swing trading and long term investments?

And remember you could eliminate some of this and just only do swing trade and a little bit longer-term investment.

Let’s say you had $50,000 in the capital. Maybe you just put $1,000 into penny stocks. But out of this $50,000 remember probably 25,000 of that is in long-term safe dividend stocks or longer-term investments.

You might only be making 5%-10% a year on those.

On this well, sometimes you might be making 38% or 68%. Other times you might be losing 15%. Who knows…

That’s the whole point behind speculative trades. You don’t know what’s going to happen. And that’s why you have to understand the allocation part.

I hope you found this helpful and gave you some insights into day trading, swing trading, or long-term investing.

With penny stocks sky’s the limit – it’s up to you. However, understand that certain trades work out better depending on the chart and depending on the company.

You need to recognize how does it fit in your portfolio. Think about it; how does it fit in your portfolio and your strategy.

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