The Disciplined Trader
This article is the second of a 3 part traders tutorial series. But each lesson can stand-alone and is essential to your success as a full-time penny stock trader. First we’ll have a look at self-discipline and how it can dramatically affect your trading results.
– Self discipline (very important)
This is one of the most critical aspects to successful investing whether it be trading blue chips tong-term or day trading penny stocks.
Self-discipline when trading means having a plan and sticking to that plan no matter what happens.
The most common contributing factor to the failure of traders is straying form their plan. After a string of profitable trades we may start to think we have worked out the markets and know how to pick winners every time.
This is when traders lose discipline, forget the rules of their trading plan and inevitably come crashing back to Earth often losing all their previous profits and sometimes more.
Now if you take anything from this series of lessons. It must be this rule, as having a trading plan and the self-discipline to follow it is crucial to the success of your trading business.
– Finding a good on-line broker
Before we can start trading penny stocks we must first open up a brokerage account. These days there are a lot of on-line brokers fighting for your business. But we must make sure we find a reliable broker with fast execution and the ability to place conditional orders eg, stop and limit orders.
Another huge factor in your success is finding cheap brokerage and two of the cheapest and most reliable brokerages we have found are:
Zecco.com provides a great service at great rates. Charging only $4.95 for stock trades and allowing conditional orders such as stop and limit orders. They also provide the ability to use trailing stops. Which trail behind a rising stock by a certain percentage or dollar value depending on your requirements.
Choicetrade.com they offer $5 stock trades, allow trading on penny stocks and also offer conditional orders. If you require more details about each brokers specific features visit the trading tools link on each website.
To get the process started just click on the above links and follow the instructions to get you account opened.When trading penny stocks, due to the volatility it is often a good idea to start with a small amount of capital.
– How to do your own research
Researching penny stocks can be difficult as they often are not covered by research analyst and it can sometimes be hard to find good information.
But what really moves penny stocks is news and promotional campaigns. When a growing company releases positive news it can often go unnoticed by the trading community. It is usually only when a company is profiled by one of the larger PR and promotion companies that this news will actually affect the stock price. This is because these companies have access to large networks of active investors which receive alerts and profiles on the company through newsletter subscriptions and social media updates.
These campaigns can sometimes be paid promotions or just a stock alert from the promotion company highlighting a potentially profitable trade. When it comes to paid promotions this can obviously be a conflict of interest as they will profile most companies that can affords their services. But this does not mean that it will not be a profitable trade. Because of the amount of potential new investors receiving an alert on a specific stock at the one time we often see enormous short-term profits in promoted stock and this why it is very important to understand how these promotions work and make sure that you are not left holding the ball if and when the buying stops and profit taking comes into play.
There are many places where you can track the latest OTC news such as http://www.otcbb.com/ to start your research and also newsletters such as Ultimate Stock Review which will alert you to stocks about to receive promotion and also plays with future potential.
As always we must always use stops when trading penny stocks and follow the rules of our trading plan.
I hope you have enjoyed this tutorial and learned some valuable lessons.
If you wish to read the other tutorials in this series go to my author page or otherwise members of UltimateStockReview.com receive these tutorials and many more when they sign up to the free newsletter.
About the author
James Brine is a full-time penny stock trader with 8 years experience researching and trading OTC and Pinksheet listed companies. He now works part-time for Ultimate Stock Review, a online penny stock education and alert service. Writing articles and educating members to help them become successful traders. For more articles visit ultimatestockreview.com and check out his other tutorials.