7 Important Penny Stock Trading Lessons

Posted by Profitable Trading Tips on Sunday, July 18th 2010

18
Jul

Today I’ve invited Tim Sykes to be a guest blogger on the site and help us understand penny stocks MUCH better!

He’s a powerful trader in this niche, and he’s actually got a new video series that you should check out here.

Please enjoy the article and be sure and get these free video lessons before he pulls them:

I have an entire category of blog posts with the basics of my proven trading strategy, but below I thought I’d list the top 7. Not necessarily the top 7 most important, as you know from this list of 94 PennyStocking lessons there’s a lot to consider, but the 7 lessons below are the ones I’ve found people have been having the most trouble with since I began teaching over the past 3 years or so:

1. Unlike other niches and due to a lack of liquidity and sometimes volatility, there are NOT great trades every day. It’s it CRUCIAL to learn to recognize these setups and then to wait for ideal setups before using your precious trading capital.

2. When short selling penny stocks, not every broker will have available shares to short. There is no one great broker that will always have available shares and sometimes none of my brokers have available shares to short (in which case no borrow no cry), but the 3 brokers I use and recommend are Thinkorswim, Sogotrade and Interactive Brokers

3. No matter how great a penny stock’s story is, I have learned to focus on chart patterns and price action first — there are a TON of penny stocks with “revolutionary” products, but if the stock isn’t moving in a way that is predictable, I don’t care.

4. NEVER trust any penny stock press release or penny stock CEO or penny stock newsletter. The entire niche is corrupt excluding yours truly and no matter how nice somebody is in person, if they are into penny stocks, there is a 99.99% likelihood that they are shady, unethical, incompetent or some mix of all of the above.

5. I will not trade stocks under 10 cents/share because the risk/reward simply is not worth it. Sure, sure, these low priced stocks can increase a large percent in a short period of time, but in 11 years of penny stock trading experience, I have not seen the predictability/reliability of any patterns to make buying or shorting these stocks worthwhile for me.

6. While I sometimes short sell a pumped up penny stock on its “first big up day”, I usually tend to wait until the 2nd or 3rd day as then my risk is much lower due to early wannabe short sellers having been squeezed and the logic that fewer people will want to buy a penny stock when it’s up 100, 200, 300% in a few days. The exception is when there are few shares to short and it will be unlikely to find available shares to short on those 3nd or 3rd up days so I will sometimes risk some pain and enter my short early, but NEVER a large position due to the risk of further spiking.

7. If the penny stock I am short selling or buying is not a pure pump & dump (which have the highest predictability), I will ALWAYS cut losses quickly because if a stock moves against me, even a little bit, I am probly wrong in my thesis. I am not a perfect trader by any means so if I don’t cut losses quickly, it means I have made a mistake. Yes it does happen. My substantial gains are not due to my being perfect, but as an academic study found, due in large part to my being right approximately 75% of the time with my gains being larger than my losses.

Free Penny Stocks Videos

Courtesy of Tim Sykes
www.timothysykes.com

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Popularity: 10% [?]

5 Reasons Penny Stock Trading Obliterates Forex Trading

Posted by Profitable Trading Tips on Friday, July 16th 2010

16
Jul

The unlimited profit potential in the hugely liquid and leveraged Forex market is pure marketing and deception, designed to lure the most desperate and greediest people into playing a game where the odds of success are very low similar to playing the lottery. If you look at the actual statistics, they point to the vast majority of traders not just blowing up their entire account within a few months, but also owing money due to the easy-to-use leverage. Unless you are illiterate and a complete moron, it is extremely difficult to blow up a penny stock trading account, mainly because the trading rules I teach are very conservative, designed to keep traders learning and earning gradually over time.
Because Forex is so liquid and leveraged, those who succeed are the smartest, richest and most well informed people on the planet, aka George Soros and his friends. You simply do not have the intelligence, wealth or access to quality information and analysis that they do so why try to compete against them? As evidenced by the recent fraud case against SpongeTech and PennyStockChaser, those promoters and management have the intelligence level of Forrest Gump. I can make a thousand analogies explaining why it’s SO much easier to trade against these morons, but after you try out my free video lessons and begin to see it all yourself, you won’t need me to teach you anymore, you’ll be self-sufficient which is my entire goal!
Forex prices move very quickly and the reaction to breaking news happens within seconds and minutes. Because penny stock manipulation takes time to plan and enact and the people trading the stocks are practically illiterate, it takes hours and days for price to fulfill their predictable patterns giving you plenty of time to prepare and participate in each trade. The best analogy is penny stocks are like Little League whereas Forex is the Major Leagues. When you’re coming up to bat would you like a 100mph fastball or a floater thrown by a nine-year old?
Penny stocks are simpler. While Forex prices gyrate wildly due to rumors, news and those anticipating the rumors and news, volatile penny stock chart patterns are truly straight up and then straight down with very little variation. That is the beauty of trading pump and dumps, the chart patterns are like pendulums and you just need to learn how to buy on the way up and short sell on the way down. Or choose one side and specialize in that.
Penny stocks have greater odds of success. Sure, sure, it’s far less money and you don’t get the gambling thrill you do with Forex since down here in the gutter it’s more like taking candy from babies (or those who are have the intelligence of babies), but we are winning approximately 75% of the time.

I’ve put together an in-depth (and free) video lesson series that will teach you everything I know about Pennystocks. Rather than just hearing me talk about my strategy and my thoughts, signup to my free video lesson series so you can learn from the specific trades and patterns themselves.

Free Penny Stocks Video

Courtesy of Tim Sykes
www.timothysykes.com

Popularity: 9% [?]

Trading a Disaster

Posted by Profitable Trading Tips on Monday, June 21st 2010

21
Jun

Trading a disaster like the historic BP oil spill can mean more than just shorting BP stock ahead of the next piece of really bad news. And, this does not mean buying call options in case BP creates a miracle and comes back from the near dead. There are lots of companies in the energy business and lots of companies selling necessary services that will profit from a second look at drilling in the deep water of the Gulf of Mexico. Trying to outguess the market with BP may or may not be profitable but investing in onshore North American energy production from coal mines and oil shale deposits could be profitable if deep wells are shut down. If the reports that many other deep wells may be at risk are true then the folks who make those deep sea robots may have a hay day making more and more submersibles to inspect for signs of danger on the ocean floor.

Every time there is news of a hurricane approaching the Gulf of Mexico the stock prices of companies that make under sea robots and in other ways support the infrastructure of drilling and extracting oil go up. Trading a disaster can mean trading these stocks every hurricane season. Now that the nightmare of a major leak has occurred the folks that make the tools to protect and service wells may go up and stay there. Knowing who has the best technology and who will prosper in a more safety conscious world may be a good way of trading a disaster or at least its aftermath. At some level this is day trading the politics of the oil spill and the likelihood of new, stronger federal regulations on offshore drilling and oil extraction.

Looking beyond the immediate issue of stopping the leak in the Gulf of Mexico it would seem than two things will happen. One is the safety issue mentioned above. The other is an end run around deep water drilling. It is to go back to land based energy sources. A set of stocks that go up every time there is trouble in the Gulf of Mexico is the companies that extract oil from oil shale deposits. The Green River Formation under lands in Wyoming, Colorado, and Utah and other US deposits hold sixty-two percent of the world’s potentially recoverable oil from shale deposits. Known world deposits of potentially usable shale contain roughly three trillion barrels of oil. This exceeds by as much as a factor of two the world’s known crude oil reserves. Coupled with US coal deposits that stand at around 275 billion tons this is a huge energy reserve. Known, recoverable coal deposits in the USA are sufficient for a quarter of a millennium at current rates of use. As the effects of oil drilling in the deep water take their effect on wildlife along the Gulf Coast, destroy habitats, and the like one way of trading a disaster may be to look inland for the future of US energy production. Where in the world the action will be in trading a disaster in the sea may be in trading stocks of companies that operate on dry land.

Popularity: 10% [?]

Video: 4 Stock Trading “Profit Pockets”?

Posted by Profitable Trading Tips on Monday, June 7th 2010

7
Jun

There are specific & precise low-risk, high-probability entry points that can lead to some potential “profit pockets” on any given chart when trading stocks.

* 4 of them were recently discovered by a 35+ year market veteran…

-and he’s recording some brand new training videos that show you what they look like, how they work together, and how you can spot them on your own.

The first training video is done, and you can see it here on his new training website…

Pay close attention to the chart that’s displayed early on in the training video that outlines these 4 “profit pockets”, which are identified by these custom methods designed to “pinpoint” each one:

* The Profit Pipeline Method…

* The Trend Validator Method…

* The Velocity Method…

* The Countertrend Cash Method…

I’m really excited about these 4 additional ways to pull more profit potential out of almost ANY stock chart, because they can complement any existing method you’re currently using…

-and that just gives you even MORE of an edge over those traders who DON’T know about these techniques.

These training videos likely will NOT be online for long, so make sure you watch & take notes here…

Whenever this 35+ year market veteran releases complimentary training videos, I PAY ATTENTION because the “on the house” information he just “gives away” is often worth more than many training courses you’d have to pay for. So, don’t take this training lightly and pay close attention to what he teaches. Your portfolio will thank you for it later

See it here…

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Popularity: 16% [?]

Trying to Outguess the Market

Posted by Profitable Trading Tips on Sunday, June 6th 2010

6
Jun

Traders have been trying to outguess the market since the first stock was offered for sale in the first stock market. Traders search for overlooked stocks that are ready for a rise in price. Traders look for stocks ready to take a dive and get ready to short them. Traders are always looking for where in the world the action will be in order to make a profit a second before everyone else finds out. In today’s world of instant messaging and social media it was only matter of time before the whispered stock tips of yesterday became the stock tweets of today. In the first days of the internet a tech savvy young man went online and hyped a bunch of stocks that he had just bought. Then, obviously, he sold as soon as his victims bought. Now folks are sending text message tips and messages on social media. Because the messages can be send and received very rapidly there is the misguided sense that the receiver is getting privileged information, much like the folks who believed the kid a few years ago. The sad fact is that a lot of those folks who are acting on tips and not doing a little technical analysis are headed for trouble when trying to outguess the market.

The skittishness of the market can be blamed on any number factors from continuing sovereign debt problems to a well deserved skepticism of market makers after the recent crash. However, the speeded up version of hot stock tips being passed from Blackberry to Blackberry (heaven forbid that anyone would just use a cell phone anymore) would seem to be a contributing factor to what appears to be a variant of following the herd. However, this herd is not wildebeests on the Serengeti but rather tech savvy traders and investors looking to get a tip before the rest of the crowd does. Trading the rallies and retreats of the stock market can be done in the knowledge that trading history repeats itself. With the use of technical analysis software the trader can predict the next moves of the market with a reasonable degree of certainty. Combining knowledge of technical trading with an overview of the stocks in which one trades will allow the trader to trade with efficiency as others look for tips while trying to outguess the market.

Certainly bits of loose information may come to a trader but in order to gain perspective and anticipate the market a degree of fundamental knowledge is necessary and what is essential is the ability to confirm the information in a so called tip with solid fundamental or technical analysis. When trading Toyota, for example, a trader will need to know if a piece of allegedly new information the computerized brake problem has already passed through the hands of institutional traders in which case the market will already have discounted the “news.” There is a temptation to believe that tips disguised in very technical terms are fresh analysis but in a world where you can receive an email that has already been copied to a thousand people it is important to be able to do your own homework and to set your own goals rather than trying to outguess the market.