I have taken notes from my hole carrier with penny stock trading. Everything I have written in this post is all by experience, so this is gold. This is in a way my personally diary. If you follow these notes while trading I can promise you profits in the longer term. Use my notes wisely!
Things you should avoid
Splits: When a company splits its stocks. This happens when a stock moves up so much that people can’t afford, and the company needs more investors, so they split it. They cut the stock price in half. Companies that have been usually very successful.
Reverse splits: When a company’s stock drops so much that a company wants to increase it. To do that, they can, for example, increase the price by decreasing shares outstanding. Usually, the worst kind of companies, because they have to decrease their shares by increasing their price in order to be listed on e.g. Nasdaq.
Biotech stocks: I usually don’t trade these because it’s too risky. Trades it when it is volatile enough.
Financial stocks: I usually don’t trade these because it’s too risky.
Commodity stocks: I usually don’t trade these because it’s too risky.
- Focus on low priced stocks under $5 – $10 per share that are up 20-30-50-100-200% ON THE DAY “Big % gainers scare most people away, but
they alert me to opportunity.” – StockQuote
- One day of gains often indicates further gains
Short junky companies as they take out day low, and ideally multi-day lows. Short junky stocks that are breaking intraday, and ideally multi-day support, and have ideally been pumped, manipulated or hyped in some chatrooms.
- Buy companies that have good news and are breaking out. You wanna buy stocks that are breaking out to new highs, with a good catalyst, and with good volume.
- Buy penny stocks with good stories, and that are breaking out to new highs on Fridays. If you get follow-up articles/TV/press in any way, latecomers look to buy on the following Monday. Buy on Friday, sell on Monday – don’t deviate from the plan. Weekends are used by busy people to catch up on news, reading, TV.
- “Some traders don’t like holding overnight, I prefer it.” StockQuote
- “Rarely will I buy a stock at 11am, noon or 1pm EST, mid-day is risky, choppy and boring for an impatient trader like me.” – StockQuote
- “I like buying into the market close (afternoon) since I’m betting on a follow-up spike the next morning.” – StockQuote
- Ideally, you want to take “the meat of the move” & sell into latecomers
- You can’t predict how much press will push up a stock, but momentum should be enough for solid profits. If hype doesn’t push the stock up, cut losses quickly before others realize the momentum is over.
- Go into trades with specific plans and goals.
- Ride the penny stock hype & profit but NEVER believe it. No penny stock company is THE one. 99% of these stocks fail.
- Don’t become a bagholder, take the 20-50% gains when you can.
ITKG is the newest revolutionary technology play to announce a contract win…or more specifically TEASE a contract win saying they “expect” a significant order shortly which I love even more than an actual contract win now since I LOVE buying the rumor/anticipation of a big deal.
- Piggyback a move (breakout winner) that have already started.
Buying right at support after a big drop in a stock that can spike a lot, is so safe and has high reward compared to risk.
Buy a stock near resistance, which should know act as support
Some of my best lessons learned
Know the hype inside & out: Gain an edge over the suckers buying these stocks without the slightest clue as to what’s really moving the stock price.
ALFSS: Always Look For Shares to Short
Sniper Trading: Aim to make specific ($0.50 – $1.0) $ and % amounts based on technical analysis, cut losses quickly.
Have No Expectations: Never set profit goals/milestones, take it one ideal setup at a time.
Stocks to buy
- I aim to buy stocks with solid earnings & contracts with big companies.
- I aim to buy stocks that are already moving upwards so I just piggyback the runup, I don’t start it.
- I aim to take manageable position sizes relative to my account size & daily volume so I can exit easily if need be.
- I aim to be alert to all new opportunities daily & not sink too much capital or waste time waiting for management promises.
- I aim to buy earnings winners & contract winners on the 1st or 2nd day of their news.
- I aim to profit from latecomers seeing new news & buying the stock, writers spreading the news & latecomer analyst upgrades.
- I aim to buy these hot stocks on intraday breakouts either in the morning or late in the afternoon, not mid-day & not mid-range.
- I aim to buy these hot stocks on dips if they hold intraday or ideally multi-day & multi-month technical support.
- I aim to make 50 cents- $1/share on higher priced stocks & 10-30% on lower priced stocks.
I aim to be choosy & resist the temptation to trade every day.
- I aim to cut losses quickly when a stock fails to breakout or fails to hold technical support.
- I aim to add to winning positions into the market close since positive news can have legs over night.
What i never do
I never try to guess earnings ahead of time, wait to see if the company reports solid numbers & ideally guides future numbers up.
Don’t try to guess reaction to earnings ahead of time, wait to see the biggest stock % winners as always.
Don’t have positions in earnings stocks before a conference call is about to begin.
Don’t just focus on the headline numbers like the news does, consider management commentary too.
Golden stock notes
- By waiting for the earnings numbers to come out, you reduce your risk.
- By waiting for a spike in reaction to earnings you don’t have to guess which stocks will be earnings winners.
- An “earnings winner” is defined (by Tim) the REACTION to earnings, not the numbers themselves … too many people make this mistake.
Analyst upgrades, followup news articles usually happen overnight the trading day AFTER earnings are announced.
- Earnings winners that break above multi-day or ideally multi-month support are best.
- Dip buy earnings winners if they hold that key
- Cut losses on earnings winners that fail to hold the breakouts/support level.
- Understand sometimes earnings winners spike on 3, 4, 5, 6, 7 after earnings.
- Ignore companies that have no reaction to earnings.
- Ignore “earnings losers” that drop in reaction to earnings.
- ALWAYS ignore ALL stocks that are unchanged on the day.
- ALWAYS ignore daily big % losers.
- Always look at past spikes to see if the current spike can hold resistance or not.
- Have multiple watchlists if need be organized by what stock you’re most likely to trade.
- Prioritize volatile stocks, earnings winners, contract winners.
- When there’s nothing great to buy I also look for stocks to short sell.
- Buy on dips when it doesn’t take out day low.
- Buy low float stocks that uptrends and break out, which also is an earnings- or contract win.
- Be prepared right at the market open and premarket, look for big % gainers and when they have contracts and/or earnings, and they have a history of really spiking in the past, you buy quick!
- Don’t chase stocks and buy mid-range (randomly), buy stocks that are near support and at key levels, and with good catalysts (eg. analyst report/upgrade). The predictable money is ON the initial breakout level or on support.
- Buy the friday (afternoon) squeeze.
- Buy former runners on dips.
- Buy earnings winners, contract winners, partnerships, rumors, Seeking Alpha articles stories if they are creating technical b/o.
- Play price action only, fundamentals and companies don’t matter.
- Look to short bounces that aren’t higher than previous bounces
- All you’re looking for is past support and resistance
Look for % gainers at 9:30-10am, buy them at 3-4pm if breaking out
- Fridays are great for short squeezes
- Round numbers become like magnets
- Buy good companies on dips near technical support
Is it a former runner? Former runners have spikeability
- Buy technical breakouts in hot sectors
- If a stock can’t breakout, and it has fading volume, and you have a profit – I will take that profit (small or big) every single time.
- If a stock has spiked big time recently, it can spike again.
- Buy into intra-day panics and dips, when there’s good news — after they have bounced.
- You don’t want to buy early on the day (11-12am), because you don’t know if the breakout is real or not.
- Look how the stock has spiked earlier — has it faded or dropped after two-three-four days?
- Have very specific plans.
- Look for earnings winners with large amounts of shorts.
- When you see an earnings winner that fades/drops, and you see it base, then dip buy it there.
- The key is dip buying earnings winner and sell into spikes. Don’t chase stocks, buy on dips and sell spikes!
You can do this multiple times — remember good R/R.
- When a stock breaks out / gaps up over previous resistance, and it holds that previous resistance as support, that good be a good thing.
- When you sell and the stock keeps go higher, that’s a good sign, that’s a sign there’s a lot of buyers: good buy opportunity.