#3339 How to trade penny stocks safely 

Self lessons

#3324-#3326 Five lesson Friday 

PennyStocking Part Deux Disc 4 1:20:00-1:38:23

 

1) Buying a stock near highs or lows will minimize risk -#3339

If you wait to buy stock right as it breaks out, your risk will be reduced since theoretically the old resistance will become support. Since the stock just broke resistance the support is right below it. If you try and guess this spike before hand, your risk will be the previous support which is significantly lower, without knowing if the stock will break.

2) Understanding percentages and their relation to numbers -#3324-3326 & self lessons

Understanding percentages and their relations to the stock you're looking at is very important and it isn't brought up much. Becoming fluent in this math skill is important because when we look for 10% profit, on a $1 stock, were looking for 10 cents. Not 50 cents. This is extremely important because people are trying to hit 50 cents on a 1 dollar stock, which is a lot harder to achieve because that would imply a 50% gain! As a general rule of thumb, you need to make 10 cents per 1 dollar the stock is worth. This will hit your 10% gain mark. 

3) The importance of setting reasonable targets -#3324-#3326

This ties into the previous lesson because we do not set reasonable goals for ourselves. Without the proper catalyst, which isn't easy to come by at times, aiming for huge returns isn't always possible. in order for a stock to hit 3 dollars from 1 dollar, it will need to gain 200%. (correct me if Im wrong, THIS IS WHAT IM TALKING ABOUT). If that same stock hits 1.40. Your stock just gained 40% and you should be rolling on the ground with joy because you beat EVERY fund and every index. 

4) The importance of learning and implementing shorting -PennyStocking Part Deux

I have a small account. Which is why I miss most trades, because I cannot short. I get scared to buy into stocks because I'm petrified of trading. However, one thing is for sure, if i had the ability to short, I would have taken many more positions. It is easier for me to understand what a ridiculous uptrend is and when it should dump, than it is for me to look at a stock and predict an upward movement, I'm extremely cynical. Like Tim says, you need to be able to have a backhand as well. 

 I looked at a few stocks this morning like $AMBS, $LIVE, $INVT, and a few others. I missed a few 10-20% profits. I wasn't taking into consideration percentages and was ignorant to the fact that the 40 cent move on a 1.90 stock was perfect. I'm still incredibly nervous around these key points, even when I come with a plan, it psychs me out. I go back to work tomorrow and will most likely sit out most the remainder of the week in terms of trading.