The order book for any 10 cent stock usually looks something like this: - Buyersat 10 cents – 4,591,395 shares
- Sellersat 10.5 cents – 7,401,301 shares
With both sides so stacked– The stock does absolutely nothing for a very, very long time.
One of the big problems with 10 cent stocksis that they move in 0.5 cent ticks (so every tick is worth ~5%). But when the stock trades sub 10 cents, they move in 0.1 cent ticks (so every tick is worth just ~1%)
Why does this matter?Picture this scenario: - Place a bid at 10 cents and wait to be filled
- The bid gets filled and you place a sell order at 11 cents (or 10% profit)
- Set a stop loss at .98 cents (or 2% loss)
You've just set the parameters for a 10% profit and 2% loss (excluding broker fees). Even if this strategy works once and you get stopped out four other times – You're still profitable!
For that reason, you’ll often see stocks like Aurelia Metals ping pong like no tomorrow.
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