Make Money 101: How to be a Cautious Penny Stock Trader

“Adults are just kids with Money.”  Everyone has seen the bumper sticker at least once during their time stuck in rush hour traffic. The irony of it is how it really does apply to everyone who invests in penny stocks looking for that $500 investment to go to $5,000. The dreamer inside novice penny stock traders can cause for some of the most costly mistakes made, not booking profits. You can make millions trading penny stocks but only one kind of penny stock trader does.

There are three types of penny stock traders: The Vouyers, the Cautious, and the Gamblers.

  • The Vouyers: Subscribing to every alert service possible looking for a catchy phrase to grab his attention to take action.
  • The Cautious: Subscribes to alerts and does his due diligence on the penny stock using his “key essentials” checklist before considering the trade.
  • The Gamblers: Subscribers to an alert service after reading a news article or seeing a percentage gain list from the day before and treats penny stocks like an all-in poker game.

One of the three survives to trade another day, the Cautious, because the Cautious penny stock trader avoids costly mistakes by booking his profits, selling portions of his penny stock on the way up, plans an exit strategy before he enters the trade and slowly, like the turtle, wins the race to financial glory.

Why the Cautious one? Because unlike other penny stock investors, he treats trading penny stocks like a business. He is an Entrepreneur.

Trading penny stocks or any stocks in the market essentially is running your own business. Just like the national average of how most start-ups fail because of costly mistakes or poor business plans, you already have what it takes since your already trading and these are some keys which can help to succeed at your business, making money in trading penny stocks.

1.       Have a goal.

It can be anything from wanting to make a living from trading penny stocks to wanting to finance the purchase of a new home. Together with the dream comes the foresight to see the pitfalls and plan a strategy on how to avoid the mistakes involved with them.

Instead of saying, Someone will probably buy into this penny stock and drive the price up so that I can double my money in it…

the entrepreneur says, “I’m going to buy into this penny stock when others are driving up the price and exit accordingly in bits and pieces maximizing my profit.”

2.       They visualize profits. 

Most penny stock traders have thoughts and ideas of how we’d like to “win big in a penny stock.” They say, If only I could double or triple my money on this trade,” or This penny stock is up 1,200% in the last 3 weeks, Maybe I can ride the wave too.” 

Entrepreneurs don’t just think about it. They see it. They spend a great deal of time doing due diligence and “seeing success.” If the goal is to make 20%, the entrepreneur sees himself or herself making 20%, sees the sell oerder before he places the buy order, and feels what a true penny stock trader feels, nothing.

There is no emotion involved in trading penny stocks. This “positive thinking” technique has been around for a long time and it still works. It helps create faith in your trading decisions, and that is a prerequisite for anyone even considering being a successful penny stock trader. They never cease to enter a trade using this visualization process: It keeps the end goal shining brightly, and for the entrepreneur, there are always new goals to reach for.

3.       They Listen and Observe. 

Being a good listener when trading penny stocks means reading, researching and filtering out the noise.

  • “The stock has a STRONG-BUY recommendation by ABC Clown Research”
  • “The SHORT-SELLERS drove down the price of the penny stock yesterday”
  • Even Apple, Inc. (NASDAQ: APPL) couldn’t fight off the negative market sentiment today”

By listening to what people are saying and observing where it’s coming from, the entrepreneur identifies what followers want. Lots of followers.

Cautious penny stock traders also listen to advice. It’s great to have people cheering you on but entrepreneurs find a wealth of knowledge in the Marc Faber types, doom-and-gloomers. They present the possible downsides allowing the entrepreneur with some new ideas to think about as they develop their trading plan. They read books, listen to motivational MP3s, learn and earn from prior mistakes and trades and stay focused and psyched up for successful penny stock trading.

Lest we forget, one of the famous contrarian investors of our time, John Templeton, reached out and invested $100 in every penny stock in the market decades ago to build his legacy.

4.       They Organize.

One of the keys to profiting in penny stock trading and avoiding costly mistakes is organization. Time is a commodity no one can afford to waste or lose. Dedicating time, resources and management skills is how the Cautious penny stock trader reaches his financial goals.

Having a dedicated email address to receive penny stock alerts you subscribe to, certain times of the day/night when you do your due diligence are essential. These allow an entrepreneur to develop trading ideas and begin visualizing a goal, they make a plan.

Cautious penny stock traders know they can’t just plunge in and hope for the best. They do research, find out if anyone is promoting the stock and for how long it has been promoted, what others in the penny stock are doing by checking message boards and looking at the trades in the penny stock from the previous day to figure out what steps they need to take to begin targeting their goal in the trade. They find out how much money they can trade in the penny stock.

If a stock has an average trade of $4,000 from yesterday’s trading session, why would you put $100,000 into it even if the stock had $30 Million in volume? Consider all of the information gathered and make decisions taking the best information from each source.

5.       They Focus.

Once the trade is planned, the work begins. There will be days when nothing goes right, and when trading ideas do not pan out. But because Cautious penny stock traders are, above all, problem solvers who love a challenge, they have the drive and grit to keep going. They bounce back from failure like Shaquile O’Neal free throws off the rim. They use stop-losses and keep their organizational plans in mind, and keep striving to achieve their target gain in each trade, one at a time.

6.       They Believe Failure is NOT an Option. 

To be a successful penny stock trader, treating trading penny stocks as an entrepreneur in your own business, you MUST believe 100% that success is inevitable.

Example: If plan to make a million dollars trading penny stocks by starting out with $1,000, it will take 36 trades for the Cautious penny stock trader to reach that.

Having faith in your ability to make things happen coincides with knowing your limitations. Sometimes, even when a stock seems to be on a run and a few more percentage points can be made, it simply takes guts-like the quarterback who decides to run the ball and, against all odds, scrambles over the pileup and scores a touchdown to stick to your plan and book your profits before a fumble occurs.

7.       Have Self-discipline.

In order to avoid costly mistakes trading penny stocks is like running your own business as we said. It doesn’t mean that you can mosey down to your home office at 9:30AM when the markets open, go to lunch at noon, and take the afternoon off. Just like in a real job, Cautious penny stock traders work hard.

Actually, many of the best penny stock traders put in more hours and work harder than they did when they were someone’s employee when they first get started trading penny stocks. But it’s easier to put in the extra hour or two when you have a goal, a passion for what you are doing, a roadmap for where you’re going, and the confidence that you can and will achieve success in trading penny stocks.

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