Penny Stock Limit orders – Using Limit orders

Since trading in penny stock offers a
potential opportunity to jump-start the career in stock trading;
many people are embracing it, as a lateral source of income.
Although the chances of maximizing profit margins are very high in
penny stock trading, you will never face success unless you are
familiar with all the components of a penny stock trading system.
According to experts, one must get acquainted with limit orders,
before taking the first leap into the unpredictable market of
microcap equity trading.

According to penny stock trading experts,
using limit orders is a wise approach while placing an order for a
penny stock. Using a limit order is more like a trading rule than a
strategy to garner success in the penny stock trading business.
Therefore, a stock market trader should always have a limit order in
place.

Generally, a limit order refers to the
order or permit to buy or sell a security, in which a certain amount
is specified at which you want the transaction to be completed.
Placing a limit order while buying a penny stock, can protect you
from big losses that could result from large move against your
order.

Let’s consider an example of not using
limit orders. Suppose, you place an order of 10,000 shares of a
stock that was dealing at 0.50 when you called in the order. Now,
market makers could have bid 0.75, while processing the stock. Now,
if you were still looking for 10, 000 shares, you will owe $2,500
more, because they sold you the shares at.25 more than your
specified amount. You will be charged an interest amount on the
money extended to cover your purchase. If you do not issue a check
for the extra amount within a week, you will be charged with the
interest on the principal amount. In a volatile market featured with
infrequent price swings, limit orders can protect you from
unforeseen circumstances by ensuring that you limit your purchases
at a price acceptable to you.

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