Insightful Penny Stock CFD Trading Tools

Penny stocks are interesting. Any stock under $5 is technically a penny stock, and especially those under $1 can be extremely profitable, since traders stand to make multi-fold gains out of small movements. Traders employ various CFD trading tools and methods for detecting these stocks and actually trading them. CFDs allow them to capture the entire stock price movement on the way up. And this is possible at very good liquidity, which in today’s stock market is essential. As liquidity in the stock market has been reduced in recent years. CFD penny stock traders have a huge advantage. CFD trading software can be used for planning the trades of the more risky penny stocks. Those stocks which are priced near $5, and hence have some downside risk. Trading CFD for a living through the opportunities of various penny stocks is actually possible. Traders usually pay attention to companies that could possibly merge, or companies with some unique proprietary technology. The stocks of such companies do at some point skyrocket, and it is possible even for a $0.50 stock to go as high as $17 in few days. But mergers are almost impossible to detect, and leaking of merger information from CEOs and lawyers is actually illegal, because it amounts to inside trading. In the case of technological breakthroughs, it is possible to know in advance which companies have good penny stocks. But timing the break out trade can still be difficult.

Using Stock Options as Predictive CFD Trading Tools

Stock Options are difficult to deal with instruments, and extremely hard to get right. But there is something cool wise CFD traders see in some stock Option contracts. It is actually possible to figure out when penny stocks are about to make a big move to the upside. By spotting over-inflated premiums in the out-of-the money Call Options, on that stock. Option brokers will know all the information about the company in question. All the information that can be legally known. And they inflate these premiums, so as to have higher premiums on these Call Options, which are typically very low for all other stocks. The problem is that most penny stocks only move by about few dollars, at best. For example they may rise from $2 to $5. But attempting to capture the actual move using Call Options is suicidal. This is because in-the-money Options are way too expensive to use. While cheap out-of-the money Call Options will only generate a tiny profit, perhaps only $0.5 even though the penny stock has a $2 or $3 actual gain! So wise CFD traders act as follows: They do look at Option premiums as part of their research, to confirm good penny stock setups. But then use CFDs to actually capture the stock price movement. CFDs are extremely linear instruments, so the entire stock price movement is captured, be it $1, $2, or even $20. And this is achieved at an affordable cost, and at amazingly good liquidity (you can close the trade right at the highest high).Online CFD trading has become extremely efficient in many ways. But looking at stock Option premiums to figure out the intentions and knowledge on the company in question, is a really cool idea all wise CFD traders know about. And it is one of their secret CFD trading tools. Out-of-the money Call Option premiums give away penny stocks that are about to make good moves. While CFDs allow to actually capture the entire move, linearly and in an affordable way, that no other trading instrument can ever offer.