Expert: Paul Henneman - 7/12/2011

Question
First I am very new to the market, two weeks in to be exact. My problem is I am trying my hand at day trading and recently bought a large amount of shares into GNBT looking to only gain fractions of a cent on a share and then sell. Now when the stock reached my planed sell amount I tried to sell but was unable to, I had to put a sell limit on it and unfortunately only was able to sell 2000 shares which was way under the amount I bought. My question is what could I have done to have prevented this and can I still get out or am I just waiting on a buyer? Also if the penny stocks work like I believe they work and that is you have to have a buyer for your shares then how can one truly make money of the penny stocks, cause if you can't sell when it peaks then it seems you can't profit from them? Any advise would be great and if you wanna suggest any books I should read that would also be nice.

Thanks very much
Nicklas Woodring

Answer
Nicklas,
  Thank you for your question!
Yes, you are right about penny stocks. The big issue is liquidity, they are often hard to sell. For most penny stocks, there are more buyers than sellers so it may be easy enough to buy in, but much more difficult to sell.  The only way to avoid this is to carefully look at the liquidity of the stock, meaning the number of shares bought and sold each day. I think you may be stunned at how few shares exchange hands for many penny stocks.  
 The other way to approach this, which is the more common way, is to not buy very much.  As you note you were able to sell some shares, but not all of them.  Most penny stock traders, make frequent trades and are invested in many different penny stocks, but do not put much into each one.  There are two reasons for this: Penny stocks are very volatile and dangerous investments. If one investor decides to dump their shares, it can drive the price down unexpectedly. The other reason is liquidity, the problem you are now having.
  The only penny stock service I like is Timothy Sykes. He has a website at www.timothysykes.com, and they do have some training materials available on the site.  I hope you find it helpful.

Best Regards,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com