How I Lost $752 While In Spanish Class & The Lesson That Can Be Learned
If you read my penny stock watchlist on Wednesday you know that I was particularly interested in shorting DRL’s recent surge pointing out that a break on support at 4.22 would trigger a very good short entry. Well, on Wednesday morning we got that break at market open when DRL gapped down 4.10 and then further tanked to 3.70 in a matter of minutes. I wasn’t fast enough to short shares on the initial tank, and when the penny stock calmed down I still didn’t want to short it being down 15%+ already…fearing a short squeeze off the morning panic.
I was right on as the we got a short squeeze, but it really didn’t squeeze as much as I would’ve liked, but good enough for me to put in my order for 1000 shares short @ 3.94. I figured the odds were on my side for this penny stock to drop back down below the low of the day made earlier in the morning. I thought I was on the right track as it proceeded to drop to 3.82, but then quickly jumped back up to 4.00. It flat-lined at 4.00 for a few hours causing me to rethink my positioning in this penny stock especially since I had class within the hour. In my mind I was still confident we’d make an afternoon fade down to the low of the day or further…..
So I went to Spanish class short in a penny stock that I THOUGHT would have an afternoon fade. When class got out I figured I’d get back to my computer to see this sucker of a penny stock down to the low of the days. Yet the exact opposite happened…as I opened up my SogoTrade platform I saw that DRL 4.69! .75 cents above my shorting price! I got juiced! I quickly covered my position and absorbed my losses of $752.
This lose totally erased my nice $661 dollar gain on MDVX I made on April 7.
With all the bad that surrounded this trade, some good DID come out of it. Here’s a lesson that can be learned from my lousy trade.
Never have a short position (or any position for that matter) that you’re not confident in open while you’re away from your computer or can’t keep watch.
Also, another lesson I learned is that I shouldn’t go to class. Just kidding!
Hopefully with that lesson learned I can prevent this kind of mistake from happening again. For your viewing pleasure I’ve attached the chart I was looking at when I made & closed the trade.
8 Must Use Tools For Penny Stock Traders
When it comes to trading penny stocks having all the right tools can mean all the difference in trading penny stocks successfully. Below I compiled 8 penny stock tools that every pennystocker should use.
MicrocapMarkets.com a great site for daily penny stock information nasdaq > 5, otcbb’s, and pink sheets. Some features include: Most actively traded penny stocks, news coverage (like mergers, earnings, etc.), Biggest % gainers as well as % losers, biggest volume penny stocks, plus much more. If you sign up for their free market report you can have all this information sent to you daily @ 4pm to help you prepare for the next trading day.
Pinksheets.com a informal site that provides quotes & news, market activity (share volume, higest/lowest # of trades, advances & declines), and you can search for pinksheet companies. Overall a nice site..if pinksheets are your thing.
Yahoo Finance a great website for looking up a specific penny stock you’re trading or want to trade. You can find news, earnings, company profiles, etc. Word of warning though, do not listen to what is being said on the message board for your specific penny stock!
StockCharts.com personally I think they offer some the best stock charts out there. I’ve been using them for quite some time and they have everything you need. They also offer a screener with predefined scans that is defintely something to brag about. Basic free service is all one really needs, but they do offer premium charts. Check out PennyStocker’s Public Chart List that I have there.
StockFetcher.com this is my #1 screener that I use to find my hot penny stock picks. The screens go above and beyond what you could imagine with every variable you could think of. This is the best penny stock screener there is bar none. I even give out one of my exact scans I use in stockfetcher inside my FREE eBook.
Yahoo Screener a basic screener offered by yahoo that is practical to find penny stocks. I’d reccomend stockfetcher over this screener, but if you have a thing for yahoo, go for it. Can’t go wrong.
BarChart.com another solid site with a information based/stock screener built in. Instead of you putting in your own parameters bar chart gives them for you like 52 week highs/lows, top 100 stocks, volume leaders, price advances/declines, etc. A great site here for any penny stock trader.
DDMachine a fantasic site to do your own due diligence. DDMachine combines alot of the above sites into one. A Definitely must visit site for anyone trading penny stocks.
Top Reasons Why Traders Fail
You Listen To Others & Not Yourself
Not making your own decisions is costly in trading. Sure you can listen to what someone has to say about certain stocks but when it comes down to making a trade it is ultimately YOU who needs to make the decision. Other individuals are often times unreliable and irrational. Listen to yourself and make sure you’re comfortable with your own choices.
You’re Not Prepared
The night before or in the morning of the next trading day have your watchlist put together and ready. Know your specific price points you’re going to buy or short at. I know it sounds crazy, but you shoud visualize the trades and plan your trades when they reach certain points. This will make it that much easier when all hell breaks loose at the opening bell @ 9:30 a.m.
For you Thinkorswimmers: Those people shorting penny stocks with the brokerage Thinkorswim better be prepared first thing in the morning (7am eastern) to reserve those shares in those hard to borrow penny stocks. If not you might not have any shares to short on that day.
You Don’t Have A Strategy
If you’re one of those wreckless traders who just sees a stock going up and says “that looks good because it’s going up, i’ll just buy it here” – then I’ll feel really sorry for you then……and later when you don’t have any money left in your account. Come up with a simple strategy so you’re not blindly throwing money around. For me, it’s simple – I only buy breakouts and short pump and dumps. Come up with yours today!
You Don’t Understand The Market
Most people don’t realize what aspects of the market affect your selected stock. Any press release, world, or economic news can take your stock down in an instant. There’s nothing you can do about it but every trader needs to be aware of what can happen. Down here in penny stock land hype and manipulation control most of the price action in these particular stocks, and is part of the reason why it’s so simple to profit down here in the “gutter”. On the flip side, you need to understand what happens during hype and manipulation and what it does to penny stocks to actually reap these easy profits.
You Don’t Have The Right Tools
If you’ve read my eBook, You know I’m a huge believer in having the right tools to trade with. For me, I have the perfect brokerage, different scans, stock charts, quotes, etc. It’s important that you have whatever tools are necessary for your trading niche. For some day traders that means having L2 quotes, for others it means having a chart with 5 min time intervals. Simply put if you dont have the needed tools, you’re trading will suffer.
10 Tips For New Penny Stock Traders
So you’re new to trading penny stocks? Don’t worry because after you read the following tips you’ll have a huge foundation to build on!
Get A Quality Brokerage
It’s important to get a good quality discount brokerage with low commissions to do your penny stock trading with especially if you have a smaller account size as commissions can do some damage. I use and reccomend Sogotrade – Only 3 Dollars a Trade.
Throw Away The High Expectations
Don’t have high expectations – you’re a beginner so don’t expect huge % gains to come quickly and right off the bat. If you have high expectations when you start down here in pennystock land you’re just affecting yourself and your trading negatively. With high expectations comes pressure to perform, and as a penny stock trader you don’t need to deal with unneeded pressure.
Start Small
You should start trading with small positions. As a newbie, don’t put all your eggs into one basket. Spread you money around in different stocks so you’re cutting your risk especially in your beginning stages. As you grow more comfortable trading penny stocks you can increase position size in a specific stock to the point where you’re trading two, three, maybe even one stock (I wouldn’t recommend this) with you’re whole account.
Do Your Own Homework
Don’t buy a penny stock just because it’s was posted on a message board or in a chat room. Do your own research and due diligence – I promise you’ll trade better because you’re comfortable with your own decisions plus it’s more gratifying to profit from a stock that you uncovered and researched yourself.
Get a Mentor
Find a mentor or educator and follow his site. I remember when I first started I was always just trying to find inspiration and to know that I can succeed and profit from trading penny stocks. So it’s very important and I’m sure you think the same, to find a website/mentor that can give you inspiration and education.
Don’t Be Greedy
This tip builds off tip #2 – don’t be greedy! I can’t tell you how bad traders mess up when they just want more and more. What usually happens is that end up earning less profit or watch a profit turn to a loss.
Don’t Get Over Confident
Don’t get over confident, if you’ve made a great winning trade congratulate yourself (cause you deserve it) and move on to the next stock. Don’t feel like you’re invinsible, because well, you aren’t. You’re just as much likely to loose all you gained in that winning trade in your next trade if you trade with a cocky attitude. Trade intelligently!
Trade Instead Of Invest
“But I want to invest in a penny stock @ $.01 and sell when it goes to $1.00″ – it’s rarely the case that a penny stock can make you a lot of money if you invest with it long term. Very few of these penny stocks are actually legit companies therefore most will never go up in the long-term. What most penny stock traders do is trade the hottest, volatile, volume-heavy penny stocks each day holding them for the short-term.
Short Selling
You can make money when penny stocks go down, too! It’s called short selling and while it’s not exactly for a newbie, if you’re up for it you should definitely try it out. If you think a penny stock is going to go down, you short it, and make money when it goes down. It’s that simple. Get my FREE ebook at pennystocker.com to learn how to do it.
Stay Tuned
Keep up to date with my site for daily hot penny stocks to watch & make sure to follow every tip to insure your success in penny stock trading.
How I Learned A Valuable Trading Lesson Shorting GGC
On March 19th GGC came up on my screeners as a potential short. It was set up perfect for a perfect meltdown after going from .25 to 1.75 in 3 Days. YES! 3 Days! All because of some credit agreement the company made with its lenders. While this is not exactly your typical pump/hype news that I love to short the stock became crazy waayyyy over-extended so I had to do it.
I was eager to short the heck out of it as soon as it busted some key support in the $1.50ish area. Surely enough it busted through that support in the early morning and I entered my short at $1.45 and proceeded to watch it literally tumble down to 1.23 within 10 minutes. I was up over $400 at this time but my greediness took over and I kept telling myself that It had to go even lower.
Well, a common early morning short squeeze came through and within another 15 minutes I was about even. Since it was my 1st trade for the new blog I wasn’t going to mess with the stock anymore and closed out at $1.46 for a minimal $25 dollar loss. Would have been $28, but I still have some free trades with Sogotrade!
I woulda coulda shoulda maybe held on and I would’ve caught that sweeet afternoon-fade back down to the low levels of the day. But I’m not always right, and I had already gotten beaten once.
So yes, while i got JUICED by the short squeeze I did learn a valuable lesson today: Take your profits and move on, especially if it’s a huge sell-off early in the morning because there’s a great chance of a short squeeze then. Also, I can’t forget I could’ve sold part of shares whenever I had that profit but I wasn’t thinking about it at the time. That definitely would’ve taken some emotion out of the trade.