This trade not only deserves a blog post by itself, but the way I worked it represents everything I've been successful at with trading sub-penny stocks, and through that how I've been able to grow my account quickly after reaching an important funding threshold.  Let me break down my entire process and reasoning and feel free to comment.

First let's examine the daily chart for this week and the five minute chart for today.

Why was I looking at this stock today in the first place?  As I was trading on 2/22, I had already locked in the gains I was hoping for in the day and still had spare settled funds to use.  (Not long before, I had crossed over the $100,000 threshold in trading profits and, equally importantly, had exited most of the positions I had been stuck in, so my available funds for trading had grown to the point that I could make about two or three large position trades every day.)

Ki point #1: Sufficient available funds to day trade combined with a strategy to stay mostly in cash in the trading account.

I was reading through the TimChallenge chat room and several folks were mentioning this stock.  There was significant volume on 2/22 with almost 1.5 billion shares traded (much higher than in the last few weeks) with a low price of $0.0023 and a high price of $0.0123.  I entered in late in the game but worked the trade conservatively and exited before the close for about $850 profit.  I then re-entered the stock on 2/23 for another round of high volume and volatility but it wasn't as exciting and I decided to not take profits that day, preferring to let my P&L grow for another day or more as the total amount invested/risked was low.  This trading on 2/22 and 2/23 gave me practical experience on the movement of this ticker.  Note that when I'm in a sub-penny, I don't just set and forget my orders.  I intently watch the Level2 and the chart to get a feel for potential entry and exit points to use in the current trade or future trades.  Sub-penny stocks allow one with sufficient funds to trade multiple positions at a time and string out gains across various timelines for repeated profits.

Ki point #2: Prior experience with the individual ticker (familiarity with how it behaves) and with the ticker family (previous successful trades with other sub-pennies).

As I was reviewing my positions on the evening of 2/23, considering my watchlist and options for the next day, I had not yet closed the chat window and MasterKim posted in the TimAlerts chat the news about the arrest of the CEO of $MFST for securites fraud.  That gave me a great heads up to focus on that stock the following day and to ruminate about my position for it at the time.  I read through the article and some other chat rooms through Stocktwits and Yahoo Finance to gather other opinions on the effect of the event.  Thanks for the tip MasterKim!  See https://profit.ly/user/MasterKim . 

Ki point #3: Leveraging news and trader sentiment to inform, but not dictate, a strategy.

Then on the pre-market prep the next day, I watched closely for the Level2 change on $MFST to get a sense for how the ticker would react.  Being an OTC, it doesn't trade pre-market, but the Level2 does adjust to show the best bid and ask just before the Open.  I had first set all of my current position to sell at just under the best ask price which started at about $0.006.  My prior day's position was bought at $0.0055 so I would be able to exit and maybe make a few dollars.  But then the Level2 dropped down to about $0.002 and I reflected on the news and sentiment and formed a new strategy.  The CEO was arrested for a fraud charge on price manipulation several years ago.  There was nothing in there about the volume and price moves for 2/22.  Further, the stock had been moving lately because of positive news regarding their business and I did not have the sense that losing a CEO would suddenly de-list the company.  Instead, it was clear there would be negative market reaction but I reasoned there was a better short term chance that the stock would eventually (possibly in a few weeks) recover to what it was trading at on 2/23 and that would still get me out with some profit.  I further reasoned that the worst scenario would be that the stock would drop to as low as $0.0001 (where it had been trading for the last half of last year), there would be panic selling and eager buying at the Open such that the stock would be halted, and that it may take several weeks for it to get back to its 2/23 or even 2/22 prices.  Given that reasoning, I was confident in executing a new plan.

Ki point #4: Developing a plan using a reasoned approach with the available information, an acceptable risk profile, and confidence in one's past experience with patterns with edge.

My new plan involved setting my current position aside for another time, creating a new position, and then laying a stairway of exit points to get out either same day or after a few days' swing.  Therefore, the exit price I had set for my $0.0055 position I put back to near the high of 2/22 of $0.011.  I wasn't expecting that to get hit today, but I wanted a limit order put in just in case and so that I could forget about that position.

Then, I decided to risk about 1/6th of my current available funds and spread out about $10,000 in several batches of limit buy orders to ensure I get fills and, based on whatever I get filled on, finalize an exit strategy later.  I knew I was going to turn right around and set multiple sell orders fairly close to my buy price, but I wanted to watch the price action before finalizing that.  Because I could set the cost basis method for every sell order to be "low cost", I knew that regardless of what I bought at, as long as my first sell order was above the highest buy order for the day, then I'd always end with the best profit.  The "low cost" selection turns the logic over to the broker to find the best price for me nearest to my sell limit price and only sells those shares I had bought at the lowest price at the moment of the sale.  This is part of the high value of trading sub-penny stocks.  Once one has a large enough war chest, then one can buy hundreds of thousands of shares, even millions, for sub-pennies, and then sell them will small price movement, and get large returns relative to that movement.

Ki point #5: Taking advantage of the multiple opportunities sub-pennies give with small price movements by making high volume trades while using a broker's settings for cost basis method.

Therefore, I set the following buy limit orders just before the open:

+ 2 million shares at $0.002
+ 4 million shares at $0.001
+ 10 million shares at $0.0001

Regardless of how the price dropped, I was well positioned to get a low price with a high volume which averaged me down if the price truly dropped to the bottom.  Even if all of those shares were bought and the price hovered at the bottom for awhile, I could afford to wait it out as it was a small part of my war chest invested.  I was willing to sacrifice some funds and time for larger payoffs in time later, similar to what I've done with $HCMC.

Ultimately, the price dropped as expected but only got as low as $0.0018 today.  That was a little predictable because of the support which was previously established in the week or so prior.  I rapidly adjusted some of my buy orders from $0.001 to $0.002 and eventually was filled for 4,010,000 shares right around the bottom price.  

At that point, I continued to closely watch Level2 and the chart to see how both sides were fighting it out.  Remember, I was prepared to sit in this for a few weeks but hoped to get out all in one day.  Seeing how slowly it was ticking up, I then finalized my exit strategy.

Ki point #6: Using technical analysis and reading the tape (Level2) to trade within the parameters of the action of the day, based not on what one hopes, but on the reality.

To exit, I employed a strategy which has been working for me on many sub-penny trades.  Earlier on in my trading, I was practicing an "all in - all out" type of trade.  This is where one has one buy order for the full number of shares and then one sell order for the full number of shares as well.  To be successful with this, one must be quite good at getting the majority of the move, or, being ok with only capturing a small piece.  But for sub-pennies, wherein I hold several overlapping positions and use the cost basis method to automatically get the best sell price, I gain more profit by not doing "all in - all out".  Instead, I use a "stair step" strategy.  For the exit, I essentially set caltrops on the way up to ensure the price steps on my spikes and gives me a steady stream of cash for every step.  On this trade my caltrops were sets of 250,000 or 500,000 shares starting at a price derived from pauses in the price action and desired minimum profit.  For example:

+ 250,000 sell at $0.0029
+ 500,000 sell at $0.003
+ 250,000 sell at $0.0031
+ 250,000 sell at $0.0032
+ 250,000 sell at $0.0033
+ 250,000 sell at $0.0034
+ 500,000 sell at $0.0035
+ 500,000 sell at $0.0037
+ 250,000 sell at $0.004 ...

Once I saw that the price was not going to get to $0.001 and that it was trying to get to $0.003, I scattered my sell orders all the way up to where I reasonably thought the price would peak at.

Now, the question is, where would that peak be? I've observed that more often than not, for any large move of a stock up or down, the next leveling point will be half of the prior move in the opposite direction.  That means that if a stock does a quick move for $0.10, then the pull back will be to about $0.05.  Not a hard rule, but it is a good general guideline for me.

Ki point #7: Using common, broad pattern knowledge to predict levelling points for high volume, large movements.

Given all of the above, how did it work out?  In a word, beautifully.  I had a plan, I worked the plan, and the plan paid me back.  I did not have an expectation for how much profit I was going to make.  I only knew I needed to take advantage of the opportunity and let the price action do the rest.

Ki point #8: Don't force a profit number, work a trading plan instead and evaluate/adjust the profit potential with multiple, successful examples.

and, because we are Ninjas,

Ki point #9: Train with indomitable spirit so that opportunity will be met with preparation.  Don't just defeat the enemy, completely outclass the enemy.

I hope that this review will help all of you Ninjas out there and: Gambatte!