7 Penny Stock Trading Tips
Tip #1 – Take off your rose-colored glasses
Penny stock promoters are quick to sell you big stories about companies that are poised to blow up and change the world with their products.
The only problem? They’re full of ***t.
If penny stock companies were legit companies, they wouldn’t be penny stocks. They’d be traded on the NYSE or the AMEX where companies that can actually meet SEC filing requirements go and be higher priced stocks, not priced like lotto tickets (which they are)
99% of penny stock companies are going to ultimately fail, and the odds that you’ll catch the 1% that do grow in the long-run are pretty slim.
So stop believing everything you hear and recognize the realities of penny stock trading. These companies may all be pieces of shit, but that doesn’t mean you can use them to profit.
Tip #2 – Adjust your profit expectations
Another big piece of hype you’ll hear from penny stock promoters has to do with how quickly your money can grow. Yes, it’s possible that a penny stock will go from $1 a share to $10, and it’s possible that you’ll double – even triple – your money on a single play.
But do you know how much I try to make with each trade? Just $0.50-$0.75 a share.
Sure, I’m happy if I make a bit more, but keeping my trades small – getting in and out when I know the numbers are right – helps protect me from risking disaster and major losses that far too any traders endure.
If you’re constantly chasing big wins, you’re going to force trades that aren’t really there. And it’s these kinds of mistakes that’ll take you out of the game before you even have a chance.
Tip #3 – Respect risk
Part of the reason I keep my profits – and my losses – small is that I respect risk.
I mentioned above that most penny stock companies aren’t worth the paper their stock certificates are printed on. Penny stocks are thinly traded, and they can be hugely volatile. Both of these factors mean that things can change quickly. Many of y students know I take profits/losses “too” quickly, but that’s fine by me.
A stock that you think is on its way up can tank in a few minutes. A stock that you think is a surefire short sell can reverse course in the blink of an eye.
A big driver in the risk of penny stock trading is the simple fact that most of these companies don’t meet SEC filing requirements and those people who trade them aren’t legitimate Wall Streeters so they manipulate stocks when they want to. That’s why they’re traded on the pink sheets and the OTCBB – believe me, they’d be on more prestigious exchanges if they could.
The bottom line is that you just don’t know what you’re dealing with when it comes to penny stocks. That press release you saw about a company’s new technology could be legit – or it could be a complete lie dreamed up by a promoter that’s been hired to pump and dump the stock.
You can’t fight this risk – but you can respect it.
Make sure you’ve never committed too much of your portfolio to a single play (the % amount is different for everyone whatever makes you comfortable, not a penny ore), and make sure that the position you take isn’t large enough to affect the stock’s price action. Always watch for good liquidity – ideally at least a few hundred thousand shares traded daily as reasonable trading volume is the only way you can be reasonably sure you’ll be able to get in and get out when you need or want to.
Tip #4 – Keep a trading journal
As a beginning trader, one of the best things you can do for yourself is to set up a trading journal that covers what moves you made, what size positions you took and whether you had a profit or loss on the trade that diary will teach you so much about trading and about yourself, it’s an invaluable resource for you to utilize if you want to become a consistently profitable trader.
The best traders out there are methodical. They don’t make plays on a whim – they carefully consider their past actions and use these experiences to make their future trades even better…both of my first 2 millionaire trading challenge students have spreadsheets galore!
Information about your past trades can be incredibly useful when it comes to improving your skills as a penny stock trader – but if you want to take advantage of it, you’ve got to track it from the start.
You can use pen and paper for this, or you can use a program like Profitly.
Either way, commit to keeping and updating your trading journal every time you make a move.
Tip #5 – Take care of yourself
Confession time…I’ve been so wrapped up in trading and teaching for the past few years that I’ve put on some weight. Well, not just some. I’m up 50 pounds because I’ve been prioritizing the work I’ve been doing to help others over my own health.
Don’t be like me!
You truly have nothing else in this world if you don’t have your health. So I know you want to stay up all night watching my free videos or reading my best-selling book (available for free here).
And when you’re watching stock charts all day and researching all night, it’s hard to remember to get up, cook a healthy meal and get some exercise.
But, you guys, it’s so important. You’ll be a better trader if you’re healthy, and you’ll be able to stick around longer if you take care of yourself.
Ditch the bad habits now. Don’t wait to make your health a priority – focus on it now when you’re just getting started as a trader so that it’s there to support you throughout your career.
Tip #6 – Give back to your community
I have to tell you, I can’t believe it took me this long to get into charity work.
Recently, I had the opportunity to help Make-A-Wish of Southern Florida get a child named Ewan the technology he needed to communicate with his family for the first time.
I’ve had some amazing experiences in my life. I’ve had the chance to travel to more than 100 countries, buy my dream car and work from some of the most beautiful tropical beaches in the world.
But I’ve never done anything as cool as this.
I think that we, as traders, have a tendency to get caught up in our own hype. We bury ourselves in stock charts, brag about how much we’ve made on past trades and subject our friends and family members to endless stories about our profits.
That’s just not what life is about, though. Let me tell you, having the chance to take some of my hard-earned money and use it to make such a big difference in the life of one family was the best feeling I’ve ever had.
I can’t wait to do it again through my new Timothy Sykes Foundation, and I highly encourage you to take time off of trading to give time or money to the causes you believe in. There’s really nothing like it.
Tip #7 – Invest in your education
I used to be cocky was younger, and I used to walk around acting like I knew everything there was to know about penny stock trading.
Sure, I’ve learned a lot in my 15 years, but do I know everything about stock trading? Of course not!
That’s why I make education such a huge priority, and why I recommend that you do too. Find the people who have achieved what you want to get out of your life and learn everything you can from them so that you can become an even stronger, more well-informed trader.
That said, only 5-10% of traders out there are consistently profitable, ignore what non-transparent traders say in far too any chatrooms, message board and “trader social networks”.
Of course, 99% of traders will tell you they ARE making money – especially if they’re trying to sell you something.
That means that you need to choose your teachers carefully. How can you spot a legit trading teacher? The secret is transparency.
If a trainer is bragging about the huge profits he raked in and how he’ll teach you to be a millionaire, ask to see records of his trades and audited tax statements showing his profits like I show HERE.
I’m going to guess that, in 90% of cases, you’re not even going to get a response back or some lame ass excuse as to why they’re not being transparent…LOL I’ve heard it all.
Remember that tip I gave you earlier about keeping a trading journal? It’s so important to me that I do it myself – and I make it available for everyone to see. Want to know what positions I took recently or how much I’m averaging on my trades? It’s all there for you to see in my Profit.ly account.
Most trading teachers won’t give you this information – and if they don’t, walk away from whatever they’re selling.
Your time is too valuable – and the money you have to spend on products is too limited – to work with anybody who won’t be 100% honest with you.
Want to work with a trainer that’s 100% honest and 100% committed to your success? I’m looking for new students to turn into millionaires through penny stock trading. Will you join me and be my next millionaire student?