TRADING ONLY $10 (OR LESS) STOCKS

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We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains. With that opportunity comes additional risk so we try to watch trendlines and support levels in an attempt to minimize any losses. Additionally, we generally utilize an early exit strategy in case a stock turns against us.

Ordinarily, if you are a fundamental trader you wouldn't be crazy about a cheap stock. Often, they are cheap for a reason, but don't think that the reason is always bad. Many times a cheaper stock won't even have a P/E (price to earnings ratio). When there is no P/E, that means there were no earnings. There may be an excellent reason why a stock has no earnings. It may have an important product in development and has had to spend revenue and borrowed money on research and development.

Just because a stock is cheap doesn't mean a trader can't make money trading it. Don't confuse a good company with a good stock.

The point is that often the lesser known and cheaper stocks can provide very exciting returns. Traders and investors in these cheaper issues are often "betting on the come." Often the companies with cheaper stocks may have great management and great product; they may be just getting up a head of steam. They need not be ignored by the careful trader or investor.

Since fundamentals may be misleading on the lower priced stocks, I believe they are best traded using technical analysis.

My name is Bill Kraft, as the editor of the $10 Trader, I search the $10 and under stocks with a couple of proprietary formulae I have developed. I am always trying to find relatively low risk plays with a potential reward to risk ratio of 2.5:1 or better. Of course, cheaper stocks can be risky. Companies can disappear quickly, but so can their pricier cousins (remember Worldcom, Enron, United Airlines before the bankruptcy). All trading involves risk (so does living life). Each of us needs to know our own risk tolerance, each of us must educate ourselves to understand the risk in any position, each of us must manage our own money and our own risk. That being said, I have found that trading the $10 and under stocks can limit risk and provide a potential for very significant returns.

Please consider trying my $10 Trader Service which focuses solely on stocks currently trading under $10 per share. Of course, we offer a 30-day free trial on this service.

Sincerely,

Bill Kraft, Editor

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