Penny Stock Trading Tips for Beginners
Tip #1 – Take off your rose-colored glasses
Penny stock promoters are quick to sell you big
stories about companies that are poised to blow up
and change the world with their products.
The only problem? They’re full of shit.
If penny stock companies were legit companies, they
wouldn’t be penny stocks. They’d be traded on the NYSE or
the AMEX where companies that can actually meet SEC filing
requirements go and be higher priced stocks, not priced like lotto
tickets (which they are)
99% of penny stock companies are going to ultimately fail,
and the odds that you’ll catch the 1% that do grow in the
long-run are pretty slim.
So stop believing everything you hear and recognize the
realities of penny stock trading. These companies may all
be pieces of shit, but that doesn’t mean you can use them
to profit.
Tip #2 – Adjust your profit expectations
Another big piece of hype you’ll hear from penny stock
promoters has to do with how quickly your money can grow.
Yes, it’s possible that a penny stock will go from $1 a share
to $10, and it’s possible that you’ll double – even triple – your
money on a single play.
But do you know how much I try to make with each trade?
Just $0.50-$0.75 a share.
Sure, I’m happy if I make a bit more, but keeping my trades
small – getting in and out when I know the numbers are right
– helps protect me from risking disaster and major losses that
far too any traders endure.
If you’re constantly chasing big wins, you’re going to force trades
that aren’t really there. And it’s these kinds of mistakes that’ll take
you out of the game before you even have a chance.
Tip #3 – Respect risk
Part of the reason I keep my profits – and my losses
– small is that I respect risk.
I mentioned above that most penny stock companies aren’t
worth the paper their stock certificates are printed on. Penny
stocks are thinly traded, and they can be hugely volatile. Both
of these factors mean that things can change quickly. Many of
y students know I take profits/losses “too” quickly, but that’s fine
by me.
A stock that you think is on its way up can tank in a few minutes.
A stock that you think is a surefire short sell can reverse course in
the blink of an eye.
A big driver in the risk of penny stock trading is the simple fact
that most of these companies don’t meet SEC filing requirements
and those people who trade them aren’t legitimate Wall Streeters
so they manipulate stocks when they want to. That’s why they’re
traded on the pink sheets and the OTCBB – believe me, they’d be
on more prestigious exchanges if they could.
The bottom line is that you just don’t know what you’re dealing
with when it comes to penny stocks. That press release you saw
about a company’s new technology could be legit – or it could be
a complete lie dreamed up by a promoter that’s been hired to pump
and dump the stock.
You can’t fight this risk – but you can respect it.
Make sure you’ve never committed too much of your portfolio to a
single play (the % amount is different for everyone whatever makes
you comfortable, not a penny ore), and make sure that the position
you take isn’t large enough to affect the stock’s price action. Always
watch for good liquidity – ideally at least a few hundred thousand shares
traded daily as reasonable trading volume is the only way you can be
reasonably sure you’ll be able to get in and get out when you need or
want to.
Tip #4 – Keep a trading journal
As a beginning trader, one of the best things you can do for
yourself is to set up a trading journal that covers what moves
you made, what size positions you took and whether you had
a profit or loss on the trade that diary will teach you so much
about trading and about yourself, it’s an invaluable resource for
you to utilize if you want to become a consistently profitable
trader.
The best traders out there are methodical. They don’t make
plays on a whim – they carefully consider their past actions
and use these experiences to make their future trades even
better…both of my first 2 millionaire trading challenge students
have spreadsheets galore!
Information about your past trades can be incredibly useful
when it comes to improving your skills as a penny stock trader
– but if you want to take advantage of it, you’ve got to track it from
the start.
You can use pen and paper for this, or you can use a program
like Profitly.
Either way, commit to keeping and updating your trading journal
every time you make a move.
Tip #5 – Invest in your education
I used to be cocky was younger, and I used to walk around acting l
like I knew everything there was to know about penny stock trading.
Sure, I’ve learned a lot in my 15 years, but do I know everything
about stock trading? Of course not!
That’s why I make education such a huge priority, and why I
recommend that you do too. Find the people who have achieved
what you want to get out of your life and learn everything you can
from them so that you can become an even stronger, more well-informed
trader.
That said, only 5-10% of traders out there are consistently profitable,
ignore what non-transparent traders say in far too any chatrooms,
message board and “trader social networks”.
Of course, 99% of traders will tell you they ARE making money
– especially if they’re trying to sell you something.
That means that you need to choose your teachers carefully.
How can you spot a legit trading teacher? The secret is transparency.
Tip #1 – Take off your rose-colored glasses
Penny stock promoters are quick to sell you big
stories about companies that are poised to blow up
and change the world with their products.
The only problem? They’re full of shit.
If penny stock companies were legit companies, they
wouldn’t be penny stocks. They’d be traded on the NYSE or
the AMEX where companies that can actually meet SEC filing
requirements go and be higher priced stocks, not priced like lotto
tickets (which they are)
99% of penny stock companies are going to ultimately fail,
and the odds that you’ll catch the 1% that do grow in the
long-run are pretty slim.
So stop believing everything you hear and recognize the
realities of penny stock trading. These companies may all
be pieces of shit, but that doesn’t mean you can use them
to profit.
Tip #2 – Adjust your profit expectations
Another big piece of hype you’ll hear from penny stock
promoters has to do with how quickly your money can grow.
Yes, it’s possible that a penny stock will go from $1 a share
to $10, and it’s possible that you’ll double – even triple – your
money on a single play.
But do you know how much I try to make with each trade?
Just $0.50-$0.75 a share.
Sure, I’m happy if I make a bit more, but keeping my trades
small – getting in and out when I know the numbers are right
– helps protect me from risking disaster and major losses that
far too any traders endure.
If you’re constantly chasing big wins, you’re going to force trades
that aren’t really there. And it’s these kinds of mistakes that’ll take
you out of the game before you even have a chance.
Tip #3 – Respect risk
Part of the reason I keep my profits – and my losses
– small is that I respect risk.
I mentioned above that most penny stock companies aren’t
worth the paper their stock certificates are printed on. Penny
stocks are thinly traded, and they can be hugely volatile. Both
of these factors mean that things can change quickly. Many of
y students know I take profits/losses “too” quickly, but that’s fine
by me.
A stock that you think is on its way up can tank in a few minutes.
A stock that you think is a surefire short sell can reverse course in
the blink of an eye.
A big driver in the risk of penny stock trading is the simple fact
that most of these companies don’t meet SEC filing requirements
and those people who trade them aren’t legitimate Wall Streeters
so they manipulate stocks when they want to. That’s why they’re
traded on the pink sheets and the OTCBB – believe me, they’d be
on more prestigious exchanges if they could.
The bottom line is that you just don’t know what you’re dealing
with when it comes to penny stocks. That press release you saw
about a company’s new technology could be legit – or it could be
a complete lie dreamed up by a promoter that’s been hired to pump
and dump the stock.
You can’t fight this risk – but you can respect it.
Make sure you’ve never committed too much of your portfolio to a
single play (the % amount is different for everyone whatever makes
you comfortable, not a penny ore), and make sure that the position
you take isn’t large enough to affect the stock’s price action. Always
watch for good liquidity – ideally at least a few hundred thousand shares
traded daily as reasonable trading volume is the only way you can be
reasonably sure you’ll be able to get in and get out when you need or
want to.
Tip #4 – Keep a trading journal
As a beginning trader, one of the best things you can do for
yourself is to set up a trading journal that covers what moves
you made, what size positions you took and whether you had
a profit or loss on the trade that diary will teach you so much
about trading and about yourself, it’s an invaluable resource for
you to utilize if you want to become a consistently profitable
trader.
The best traders out there are methodical. They don’t make
plays on a whim – they carefully consider their past actions
and use these experiences to make their future trades even
better…both of my first 2 millionaire trading challenge students
have spreadsheets galore!
Information about your past trades can be incredibly useful
when it comes to improving your skills as a penny stock trader
– but if you want to take advantage of it, you’ve got to track it from
the start.
You can use pen and paper for this, or you can use a program
like Profitly.
Either way, commit to keeping and updating your trading journal
every time you make a move.
Tip #5 – Invest in your education
I used to be cocky was younger, and I used to walk around acting l
like I knew everything there was to know about penny stock trading.
Sure, I’ve learned a lot in my 15 years, but do I know everything
about stock trading? Of course not!
That’s why I make education such a huge priority, and why I
recommend that you do too. Find the people who have achieved
what you want to get out of your life and learn everything you can
from them so that you can become an even stronger, more well-informed
trader.
That said, only 5-10% of traders out there are consistently profitable,
ignore what non-transparent traders say in far too any chatrooms,
message board and “trader social networks”.
Of course, 99% of traders will tell you they ARE making money
– especially if they’re trying to sell you something.
That means that you need to choose your teachers carefully.
How can you spot a legit trading teacher? The secret is transparency.
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