Trading Strategies
Now that you know how this market works, here are a few specific rules and strategies you can use to cut your losses and book more profits.
THE #1 RULE TO REMEMBER ABOUT THE PENNY STOCK MARKET IS THIS: IT IS LIKE THE WILD WILD WEST. THERE IS RISK AROUND EVERY CORNER. THIS MARKET IS FILLED WITH LIARS, CHEATERS AND THIEVES ALL TRYING TO SEPARATE YOU FROM YOUR MONEY. YOU HAVE TO ASSUME EVERYTHING YOU READ OR HEAR ABOUT ANY PENNY STOCK IS A HALF TRUTH AT BEST. ALWAYS VERIFY EVERYTHING YOURSELF.
MOST OTC COMPANIES WILL HAVE LITTLE TO NO LONG TERM VALUE AND WILL GO OUT OF BUSINESS WITHIN A FEW YEARS AFTER START UP. PLEASE ONLY MAKE SMALL INVESTMENTS IN THESE STOCKS. NO MATTER HOW GOOD A STOCK SOUNDS YOU NEVER EVER INVEST MONEY YOU CAN NOT AFFORD TO LOSE. ASSUME YOU WILL LOSE EVERY PENNY IF YOU DO INVEST IN THESE STOCKS.
Having said that, there is no market that we know of offers traders an opportunity to book great profits.
You just need to be smart about it. Memorize these strategies and think about them when ever you trade. They have saved MANY from unnecessary losses and helped traders just like you to successfully navigate this market.
Ready?? Here we go !!
Do not fall in love with these companies. Trade them to make money. If they go up, sell them at a profit. If they go down sell them quickly for a small loss and get ready for the net one.
Your focus needs to become "do I think this stock has an exciting enough story that OTHERS will go out and buy it when they hear or read about it".
See, if OTHERS go out and buy it after you, and there is more buying than selling, the stock price heads higher allowing you to sell at a profit.
To you, these stocks should just be four letters (the symbol) and a number (the price). You should not get emotionally attached to them. Let the other guy fall in love with them. He is the guy who is going to keep buying it so you can sell it to him at a profit.
Book your profits EARLY when in a position to do so.
Here are some time tested strategies that when used will put you on the path to profits.
GETTING IN
Always use limit orders when getting into a stock. Pick an entry price and stick with it.
Don't chase stocks. There will always be another trade right around the corner. Don't beat yourself up if you miss one. The last thing you want to do is over pay because you see a stock moving and think you are missing the boat.
Never use market orders to enter into a trade. Using market orders allows the market maker to fill you at whatever price they like and leaves you vulnerable to getting poor fills.
IF A STOCK GAPS WAY UP DO NOT CHASE IT.
Most stocks that gap up will come down during the day. (usually starting between 9:45 EST and 10:15 EST) When a stock gaps up the market makers will usually push it lower starting at this time to try to get investors to panic and sell shares back to them so they can make a profit on any shares they are short from filling orders on the gap. If you like the stock and it gaps up you can usually pick up cheaper shares when the market settles back.
WATCH THE OPEN
Watching the open is very important. You can learn a lot about how a stock may act in the first 10-15 minutes after the market opens. The first thing to look for is lots of selling. If you are watching a stock that has an average daily volume of 50,000 shares and the stock trades 250,000 shares in the first ten minutes and it isn't moving this is not a good sign. This means there are lots of sellers and they are probably only going to get more aggressive as the day goes on.
You want to see a stock tick up on a regular basis as you see buys come in. If you are in a stock and you see lots of buying and it's not moving GET OUT. Don't wait.
KEEP YOUR LOSSES SMALL
THE SAFEST WAY TO DO THIS IS TO SELL A STOCK IF IT GOES BELOW THE PRICE IN THE ALERT. This price is always the prior days closing price.
When you enter a trade you need to determine how much you are willing to risk. Have a firm number and get out if the trade goes against you.
Every big loss started as a small loss where the investor lost control of their emotions and didn't close out the trade. All investors have trades that go against them. It happens to everyone. Successful traders know how to limit losses while unsuccessful ones do not. They begin to hope and pray that the stock will turn around so they don't lose money and next thing they know a small 10% loss is now a 40% loss. At this point they begin to think the stock cannot go any lower and they hang on. Now it's a 90% loss and they finally sell. Do not let this be you. Put a line in the sand in every trade you do. When it gets over that line, get out.
There is an order called a Stop Loss Order. These orders are put below the current market and are triggered when a stock is on the way down. A stop loss order is designed to limit your loss or protect your profits on a trade.
NO ONE SHOULD TRADE PENNY STOCKS WITHOUT STOP ORDERS.
THE BEST PLACE TO PUT YOUR STOPS IS JUST BELOW THE PREVIOUS DAYS CLOSE. THIS IS ALSO THE PRICE I MENTION IN MY ALERTS. STOPS SHOULD BE KEPT TIGHT TO LIMIT LOSSES. 10%-20% MAX.
WE SHOULD NEVER HAVE TO HEAR FROM A READER THAT TOOK A BIG LOSS IF YOU FOLLOW THIS RULE. THIS IS THE SINGLE MOST IMPORTANT KEY TO SUCCESS IN TRADING.
IF YOU DON'T USE A BROKER THAT ALLOWS STOP LOSS ORDERS, GET ONE.
Here is a link to ChoiceTrade they allow stop loss orders and only $5 trading fees on penny stocks. Here is a link to open an account.
http://wfwsconsulting.com/choicetrades
SELL ON THE WAY UP
When entering a new trade determine beforehand where you want to get out when the stock goes up. It helps to put in a sell limit order in at the same time you buy the stock. Then when the stock hits this price you are taken out and don't have to struggle with wondering if it's going to keep going higher. Book your profits.
BE CONSISTENT
Get used to booking profits no matter how small. It may help to learn to take small profits when you begin. There is nothing wrong with taking 10%, 15%, or 20% profits on trades. This gets you in a winning state of mind and makes taking profits much more of a habit. You do not need to buy at every low and sell at every high in order to make a lot of money in the market. You just need to be consistent.
Everyone wants to hit home runs when they buy penny stocks but the fact is most investors will lose more money hanging on for the big winner instead of taking consistent profits. DO NOT BE GREEDY. This will be the death of your trading account.
TRAILING STOPS
You should always use trailing stops to protect your profits after a stock has gone higher. For example if you get into a stock at .10 cents and it runs up to .20 cents you want to protect your profits. Some people will decide to get out completely and that's smart but some of you may want to stay in the trade to see if it goes higher. The best way to do this is to use a trailing stop. In my example your stop may be .18 cents which means if the stock comes down off .20 cents and gets to .18 cents your stock is sold. This protects your profits. A mistake that many traders make is allowing a profitable trade to turn into a break even or losing trade. Don't let this happen to you. Use trailing stops. If the stock continues to move up you move your trailing stop up with it to continue to protect profits as you go.
Always book profits no matter how small. Put the money in the bank.
Follow these rules and you will become a much better trader.
We hope you learned a lot. Many have told us that no other newsletter has been so upfront and honest with them. We hope you feel the same. If so please help spread the word. The reality is, now that you know this market is all about exposure you can see that the more subscribers we have, the more people that see the story and the more upside potential there is.
You are helping us, yourself and your friends by making sure that they read this newsletter too. Please tell them about your experience here.
Please help us out by going to www.facebook.com/whisperfromwallstreet and clicking the like button to show your support.
Good Investing,
www.whisperfromwallstreet.com