How long should I hold my Penny Stocks?

A typical question heard from investors after they purchase a penny stock is how long they should hold on to the stock. Obviously with penny stocks the chance you’ve found the next Amazon or Facebook is vanishingly small, so you know you won’t be holding the stock forever. So the real question behind how long to keep penny stocks is how long is it likely to be until I make a profit or have to cut my losses? Traditionally there are several types of investors that take different approaches to the length of retention. The first type is the day trader, who might only hold a stock for minutes before selling it. They don’t hold a stock overnight because that’s one risk they try to avoid by day trading. Day traders like lots of small, frequent profits. The next type is the swing trader who might hold a stock for several days to several weeks. The swing trader is looking to catch part of a trend and to profit from that. They need not get in at the beginning of the trend, nor do they need to hold until the end of the trend. They’ve found they can make sufficient profits by catching the middle part of the trend. Finally, there are the buy and hold investors, who believe, like Warren Buffet, that if you pick the right stock, there’s no reason to sell ever. We’ve already eliminated this trading from our discussion of how long to hold a penny stock, so let’s get back to the day trader and the swing trader. In reality, you might hold a penny stock anywhere from less than a day (like a day trader) to several weeks (like a swing trader). It all depends on your reason for buying the stock. If it was in response to news that’s already happened you might buy and sell the same day. It’s likely you wouldn’t hold the stock longer than several days. If you’ve purchased the penny stock in anticipation of some news or announcement, you might hold it for as much as several weeks, but when you buy you should have a timeframe in mind where you know you’ll unload the stock if the news you’re expecting doesn’t emerge. So there you have the answer to how long you should keep your penny stocks. It will vary based on why you bought the stock in the first place, and what you’re expecting. It shouldn’t last beyond a few months and it might be as short as a few hours.