After scanning a large number of emails, message boards, news articles, some chart screens and just an overall feeling about how fresh and clean today is with the scent of apple pie in the air, you pinpoint the OTC stocks your trading today. Then, shares in that hot penny stock you placed a buy order on 30 minutes ago are now down 45% and with so many sellers, your stop loss order couldn’t save you. What do you do now?
Everyone wants to be a winner investing in penny stocks; at least, they think so. Sadly, most traders are unwilling to perform the due diligence necessary to be a consistent winner which is why we do it for you in our articles as best we can. Winners trading penny stocks generally achieve success by focusing on a goal. Being focused allows traders to remain committed to the tasks at hand. Most winning traders carry out a lot of their own hard work; including a commitment to deal with some of the mundane duties. Overall, winners trading penny stocks implement an “I am solely responsible for both my failures and successes” attitude.
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So, where does the wannabe winning trader begin in the quest for penny stock trading success? By focusing on the tasks at hand. The most successful approach of all is to treat penny stock trading as if it was a business, and, as in any business, money management is precious.
Example: Think of your portfolio like a small convenience store. You wouldn’t inventory 80% of your store with Cheez-Whiz because there is a chance of demand increasing for the bread spread.
Money management, next to momentum, is probably the most overlooked aspect of penny stock trading by newer and smaller investors. Man, by nature, is an optimistic creature, The rookie trader more often than not acts instinctively. Unfortunately, this instinct or optimism is often the doom of the newer and smaller trader. See here for what we mean about optimism.
When a person enters a penny trade, he/she does it with the intention that it will be a winner. When the trade position goes south, he/she continues to think (or hope) “it will bounce back.” He/she knows they should have a stop-loss order in place, but hope and optimism continues to tell them to stay in the trade just a little longer since everybody knows “you always get stopped out the day the stock turns.” Ultimately, hope and optimism turn into anger and frustration, desperation and, finally, panic, pressuring the trader to issue a GMTFO (get me the fcuk out) order.
If you’re trading penny stocks and have yet to learn this lesson by this stage of your business, you risk developing the “I have to get it back” syndrome. Traders who suffer from this syndrome generally rush into another poorly planned trading situation, chasing gap ups and throwing good money after bad.
Winners trading penny stocks show a number of different characteristics. They step into a trade knowing they could be wrong and, in fact, are wrong just as often as they are right. They have developed their understanding that penny stocks don’t run on hope. They learned to believe that penny stocks tell them when they are right or wrong. When a trade is in a losing position and getting worse, the penny stock is telling them to get out.
A poor trade is like a dead duck: The longer you keep it, the worse the stench gets.
Example: Sunpeaks Ventures (SNPK)
In contrast, when a penny stock is making money, it’s telling them they are right and to adjust their sell order and let the position ride. Winners trading penny stocks don’t add to, or “average down”, losing trades. They dump the stock and search for a new trade opportunity. Successful penny stock investors will sometimes add to winning trades. When ahead in a trade, successful investors sometimes press their advantage knowing that, at any time, the penny stock can turn on them and prove them wrong.
Example: Omni Ventures (OMVE)
Years of penny stock trading history has proven that one of the most successful ways to minimize the loss-inducing power of emotions, – greed, hope, shame – and maximize the attributes that will add to future penny stock trading success – discipline, clarity, focus – is by enforcing the use of trading rules and tools.