A few days ago I read a blog posted by 'Dre-investments' concerning 'Penny Stock' trading. This was a well written article which gave some good pointers on trading penny shares. The one piece of information that I took away with me was the importance of placing 'Stop/Losses' on them.
I have shares in an AIM listed gold mining exploration company: Greatland Gold (GGP). yesterday I read an article from 'Proactive Investors': http://www.proactiveinvestors.co.uk/companies/news/177847/greatland-gold-shares-soar-following-newmont-mining-tie-up-177847.html
A snippet from it was as follows:
Shares in Greatland Gold PLC (LON:GGP) soared on Tuesday after it signed a deal with giant Newmont Mining Corp (NYSE:NEM), which it said could “accelerate the realisation of the potential value” of the Ernest Giles Project in Western Australia.
Having seen the share price rise, I immediately thought back to what I'd learned and placed a Stop/Loss on my shares (reason being that I was now up and so wanted to lock in a profit). Near the end of yesterday, I logged back into my platform account and noticed that my shares in Greatland had now been sold. At first I was relieve and thought that this was a good thing but I soon realised that this may have been a mistake.
Whilst I had placed a Stop/Loss on my shares, I hadn't factored in the bid/ask price spread (remember this is often very wide with penny shares). This meant that the price I received wasn't the stop/loss price but lower!!! To my horror, this morning when I logged back in I noticed that the shares were trading higher on the open....."Sh*t! it's gonna cost me a lot more to buy back in at the same level" I thought!
Fortunately at around 10:40 today the price dipped enough for me to buy back in and own 2.5% more shares that what I had held a day earlier, at no extra cost. This isn't a brag, this is a lesson learned - I'm an investor not a trader. Anyone investing in shares who's not experienced is better off holding them for the long term. Sure, there will be gains and dips that you won't capitalize on, but at least if the fundamentals are right you're going to be a winner eventually!
(please upvote if this has been helpful)