I lost thousands trading junk penny stocks. And truth be told, most penny stocks are cheap for a reason. It’s kind of like the clearance aisle at your local superstore. Most of what you see there is pretty much junk. So, why would anyone ever want to trade small caps? One word comes to mind, potential.. HUGE potential! In my early years of trading, I thought you needed a huge event (news catalyst) like the auto bailouts, where giants like Ford hit the floor in price only to leap back in the following months. I was wrong! We have stocks that move over 100% weekly and at times daily in small caps. The reason is they are affordable, have a low float (fewer shares available to trade) and news catalysts that get retail traders very excited. This is a recipe for parabolic moves!
If penny stocks are so awesome, why did I say I lost money trading them? First, trading in general is very difficult. Anybody that thinks they are going to take a few grand and instantly hit the trading lottery has a very different reality coming to hit them where it hurts, the wallet and their ego! First of all, I lost due to my own greed. I started listening to gurus saying they got rich off of one lucky trade. They even gave me their roadmap to achieve these monster gains. And like so many others before me, I started hemorrhaging thousands from my previously sizable account. I got to a point where I thought this day trading thing was totally impossible and no one should do it. It took a lot of nature walks with endless meditating for me to finally get it. Focusing on potential gains and future profits will only get me the opposite. In trading, only one thing really matters. I know new traders would say that one thing is an amazing pre-packaged setup or strategy. What matters the most is risk management. Protect your capital at all cost!
Most new traders want to have gurus feed them alerts, buy in the easiest way possible and sell for mega life changing profits. The guru part is self explanatory. This is a very successful trader that proves themselves worthy with mansions and super cars..duh. Buying in the easiest way would be market orders if you’re in your own brokerage platform. And boom, you’re rich. Dishes are done! Not so fast. First of all, a market order is like writing a blank check! Not to mention you CANNOT feel price action with market orders. And it should go without saying that you should not be buying other people’s alerts blindly. I personally only use Limit Orders for my trades! A market order may have value if the price action is quickly moving away from you. But personally I think limit orders with a healthy dose of the cancel all hot key work pretty well.
Next time I’ll tell you what I intended to say in this post..haha!
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