The Best Way to Get from Penny to Profits…
Once you’ve decided to get real about penny stocks, it’s time to get in the right mindset.
If you want to learn how to invest in penny stocks, you’ll need to consider these things before you make a trade …
Learn to Identify the Best Patterns
One of the things I stress in my teachings is pattern identification. Learning to identify patterns in penny stocks is one of the keys to finding great stocks to trade.
So, how do you begin to identify patterns? By obsessively reading charts, looking at the trajectory of stocks over time, and studying … and then practicing your ass off! In my teachings, I introduce my students to a lot of common patterns in penny stock trading.
It’s important to know that trading patterns are kind of like snowflakes: no two are exactly the same.
But the more you learn, the more you’ll be able to identify similarities in patterns. Once you begin to notice similarities, you can make more confident trades and your risk will be mitigated because you’re applying some science and research to your investments.
Become a Detective
Bet you didn’t know that you’d have to become a private eye to trade penny stocks. However, being able to do some financial sleuthing is vital if you want to learn how to trade penny stocks.
One of the biggest allures of penny stocks is that there’s an easy entry for traders. Really, all you need is a brokerage account and a laptop, and conceivably you could be trading.
However, this doesn’t mean that you should be trading just like that. Not only do you have to take the time to learn how penny stocks work, but you must do research on potential plays.
Penny stocks aren’t regulated as highly as the stocks on national exchanges. So it’s extremely important to research the companies and stocks you’re considering buying.
Never take press releases or stock tips at their word. You never know who stands to gain from such promotions, and penny stocks are filled with pump-and-dump schemes.
Don’t become a cautionary tale. Always put in the time and effort to get down to the bottom of the real story. It could save you money and heartache.
Paper trading (also referred to sometimes as virtual trading) can be a fantastic way to get your feet wet when you think you might be ready to buy penny stocks.
Paper trading means that you’ll get to simulate trades in a realistic manner, but without actually putting money in the pot.
This is a great way to test your prowess and to see if your pattern recognition and theories about trades are correct. It’s a low-pressure way to begin testing yourself without putting actual money on the line.
There are plenty of platforms for paper trading online. Try one out for a while before you begin to trade using your real account. It can be extremely informative, and it can be a good indicator about whether or not you’re ready to start trading for real.
Start Small and Go Slow
Are you ready to make your first trade?
When you’re ready to start trading, do yourself a favor and start slow. Don’t start out with huge positions in your trades. Allow yourself to build confidence over time by making small trades at first.
Rather than focusing on the dollar amounts, focus on small gains and learning from each trade. Consider this investing in your knowledge account.
While this might not be as thrilling as throwing all your money on the table, it’s a far more stable way of approaching trading, and it will likely lead you to a longer and more steady career as a trader.
Let Failure Be Your Teacher
Let’s talk about the F word in penny stock trading: failure.
You win some and you lose some. This is very true for all traders, but it’s an important lesson for new traders to get ahold of right away.
Losing trades and making mistakes is part of the process and it will continue to happen throughout your career, no matter how great you are at pattern recognition.
As an example, even after years of trading I’m still only profitable about 70% of the time. You can access my stats at any time on my public page online.
There are just too many factors at play to get it right all the time.
But rather than lament this or thinking that you’re failing as a trader, make a decision to learn from your errors.
This is part of why I suggest starting small. This can minimize your losses, and allow you the freedom to really evaluate what went wrong during a trade. It’s easier to do this when you haven’t lost a lot of money.
By taking the time to evaluate your mistakes when they are still relatively small, you can become a stronger trader. This means that as your trades become bigger and your position increases, you can be less likely to make the same errors.
Set Specific Goals
Setting goals is a vital part of the process of becoming a trader. Goals act as your motivation to learn and keep getting better.
Basically, the more specific your goals are, the more powerful they are in terms of keeping you motivated and performing at your best.
Don’t underestimate the power of goals in terms of helping you forge ahead successfully as a trader!
Find a Mentor
Since penny stocks are a singular type of investment, having a mentor who is further along than you in their career can be immensely helpful.
Because they’re further along the line in their career, they’ve already learned how to buy penny stocks, and a whole lot more.
By meeting with and learning from a mentor, you can absorb all sorts of knowledge about what to do — and what not to do — as a trader.
Tomorrow, let’s look at where you can buy penny stocks and what to look for before you buy.
I’ve got a few more tricks up my sleeve before you jump in.
So hang tight, and we’ll talk tomorrow.
— Tim Sykes
Editor, Penny Stock Millionaires