Buying, Selling & Trading Junior Mining Stocks
When it comes to trading junior mining stocks, a lot of people think that they are the same as any other equity. Sure they do trade the same as any other hot penny stock out there but the charactarists of them is quite different. There are many things to be aware of. One of these is whether to day trade the stock or swing trade the stock or just hold for the long term.
Firstly, most of these mining stocks are Canadian stocks so you will need to find a penny stock broker who deals in Canadian gold stocks and Canadian mining stocks if you want to buy or trade penny stocks that are in the junior gold sector. Also because a lot of these stocks can be pennies in price a lot of people think that you can make a lot of money. After all a 10 cent stock just has to go to 15 cents and you made 50% on your money. Not bad considering some of these stocks can explode to the upside by the 1000%. That is why a lot of people trade penny mining stocks as a living. But what most fail to be aware of is that a lot of these stocks are very illiquid, meaning, they don't trade very much. It is easy to find a 10 cent stock but when one looks at the trading range over the past year or so you may be see that it has not traded very often. Or the trading volume is slim. Buying a stock that you can't sell or the spread between the bid and ask is wide is a sure way to loose out
Secondly, most junior mining stocks are owned by companies that depend on venture capital or private placements to keep them funded. Because they are in the exploration business, they do not have a way to generate any income. They just spend it. They may have mineral property or the rights to certain properties, but as they say in Canada, it could be just moose pasture. Without any good drilling results in the ground or good assays, there is not much to get excited about. Exploration in remote areas of the world is a very costly venture. Litterly millions of dollars can be spent on a maybe or what if. But as history shows so often, when it comes to gold and gold mining in general, people are always willing put out the money and make their bet. Precious metals always holds the fascination and dreams of easy riches and wealth. Mention gold and most investors rich and poor will raise to alertness.
A lot of these companies are kind of like sheep. Meaning they follow one another around. Or so it seems. One company finds a hot spot or new strike and it seems the staking rush is on. In a matter of days all the surrounding properties can be snapped up and staked. You can always see this in the trading activity of the stock with these companies. The one who finds good results, the stock price shoots up. Those who have property around or close by will see some activity in their stock trading to the upside. People have a tendency to chase to rumors. Some refer this to ambulance chasing. People who trade penny stocks refer to this as "Buy the rumor, Sell the news".