The Secret to Developing Your Penny Stock Mindset
Yesterday I introduced you to the 10 steps to succeed with pennystocking.
This guide I am providing you with is long and in-depth.
Most people would charge for it. But, I am making it available to you for free.
You see, I’ve already made my money. I want to share the secrets to my success with the hope that you too, will be able to reach your dreams — whatever they may be.
Without further ado, let’s jump into the first two, and most important, steps in this issue:
1. How to Trade Penny Stocks
Unlike stocks that trade on the major exchanges, penny stocks are traded over the counter (OTC).
If you’re reminded of medications like aspirin and ibuprofen, you’ve got the right idea.
However, instead of visiting your local CVS, you create a broker account and trade through the OTC electronic exchanges.
A brokerage account allows you to execute trades with the money in your account. If you’re trading penny stocks, you can open an account with as little as $500. I started with just over $12,000, but you don’t have to follow exactly in my footsteps.
Once you have an account, you can buy and sell stocks.
I’ll get into more detail later, but suffice it to say, you’ll trade penny stocks no differently than you would any other stock.
The transactions simply happen faster and for different reasons.
What Is Pennystocking?
Pennystocking is, quite simply, the activity involved in trading penny stocks. You decide what stocks to buy, sell, or short based on patterns in the market. I call them price moments.
You’ll know when you’ve found the perfect moment to invest. But that knowledge only comes with education and practice.
If you’re willing to understand charts, patterns, and other aspects of pennystocking, you’ll generate profits. You’re not investing in long-term holdings, like you would with blue-chip stocks, but instead taking advantage of the ebb and flow of a volatile market.
I’ve focused on pennystocking for my entire career, which spans more than 20 years. If I didn’t know I could profit from daily pennystocking trades, I would have given it up long before now.
Benefits of Penny Stock Trading
I said before that penny stocks are complex, and that’s true. However, they’re far simpler than any other type of security.
These companies are small and likely new to their spaces.
They might even be in danger of going out of business. They’re not required to submit financial documents by the Securities Exchange Commission (SEC), which removes a ton of variables right there.
Because of their simplicity, you can learn to trade penny stocks much faster than you could learn to invest in the New York Stock Exchange or some other larger securities exchange.
Pennystocking is also beneficial because you learn as you go. You’re only investing a small amount of cash in each play, and your returns are equally small.
Sometimes you hit a major play that results in six-figure profits, but that’s rare. Instead, you’re growing your wealth over time.
That might not sound like much of a benefit, but my students often tell me how much they appreciate the security and peace of mind pennystocking brings.
Big risks might mean big rewards, but they can also mean huge losses.
2. How to Develop Your Penny Stock Trading Mindset
I mentioned before that I don’t like risk.
You shouldn’t, either. If you take huge risks in the stock market, you stand to lose huge amounts of money — sometimes well and above what you invested in the first place.
That’s not my idea of a sound trading strategy.
If you want to successfully trade penny stocks, focus on watching stock performance and hedging your bets.
Never invest more than 10% of your trading account on a single play, and if you have a small trading account, limit that to 1%.
You also need to set your own boundaries based on your risk tolerance. What are you willing to bet on a single play, and what will happen if you’re wrong? Write down your own rules and stick to them.
Am I Willing to Work Hard? Am I Willing To Fail?
The word “failure” scares most people.
We’re conditioned from the moment we can talk that we should strive against failure.
To fail is to disappoint your parents, siblings, teachers, friends, and everyone else you care about.
But in the stock market and in business, failure isn’t just acceptable — it’s unavoidable. You can’t invest in the penny stocks without failing at some point.
I’ve failed over and over again.
The important thing isn’t to avoid failure, but to learn from it. If you’re willing to work hard, accept failure, and learn from your mistakes, pennystocking will be right up your alley.
You’ll learn that failures eventually turn into success because you’re willing to learn.
Stay tuned for steps 3-5.
We’ll have a look at some of the more common investment types as well as a look at the inner workings of Wall Street.
Knowing what goes on behind the scenes is crucial to how you position yourself as a trader.
— Tim Sykes
Editor, Penny Stock Millionaires