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Are YOU Cut Out to Trade Penny Stocks?
This is a loaded question, and the reason I ask it is because you need to find out for yourself. I am going to give you some information on what I think it takes to be successful. First though, let’s see it you even the type of person that can succeed at penny stock trading!
The good news is there is life outside of penny stocks, so don’t feel bad if they don’t fit you. I will admit it is a whole lot more fun WITH penny stock trading in your life!
What makes a person successful when it comes to trading Penny Stocks?
You’ve got to understand risk.
What I mean by that is this: You have to be able to take the emotions out of it and look at a stock for all of its factors. You have to be able to decide if it is a short-term play or a long-term play.
FYI – “Short Term” for penny stocks is a few minutes to a few hours. “Long Term” may only mean overnight!
While that sounds seriously funny, it is brutally honest. Don’t ever think you can simply buy a penny stock and just consider it part of your “investment portfolio” like AAPL, GOOG or FB. It has a lot more in common with a leaving money on a black or red in roulette after you win. You need to learn to take profits no matter how quickly they were gained. More on that elsewhere on the site.
Are you willing to lose the money you are using to invest in penny stocks? This has to be money you can lose. That’s because sometimes you will lose.
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What is Your temperament?
Can you handle the pressure? If you are sweating each and ever trade and you are using money that you really can lose, you might not be right for it. On the other hand, if you find it exciting to watch Level 2 come your way, go against you, come back again and finally you end up a winner or occasionally a loser, this is more in line with your temperament.
You might find yourself at an airport restaurant suddenly in need of a fist bump or a high-five when the right price hits and closes out your position. Too bad the rest of the world doesn’t necessarily follow your favorite penny stocks.
Can you learn from your mistakes?
This is big. It is so costly to make stupid mistakes. You’re all in per your limits you set, and the price falls some more. You think – wow – this is my opportunity! YES! You decide to double down and make this an even bigger win. It falls more. Now you go into money that you never intended to use on penny stocks to further double the double down, only to lose about ten times what you were willing to in the first place.
Take the small loss is the lesson there. There are many such lessons, and I explore them on my site in many areas. Be willing to learn!
Let’s Say You’re Doing It!
You are taking the plunge, so what’s the next step?
Read a lot. Read financial reports for each and ever company.
Don’t read sponsored “equity research.” It is all bogus.
Play small. Be willing to start with about a fifth of the money in an account that you could tolerate as a loss. Try it. See if you like it.
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