Monthly Archives: October 2013
I created this blog to help document my ever-changing journey into the world of trading penny stocks. For those who may not know (that would practically include everyone), I first started trading stocks online back in 2001. I have been through all of the dumb beginner mistakes, and I have felt (many times) the painful pit in your stomach when you either lost money on a trade, or missed an opportunity where you could have made a ton of money on a trade. I’ll more than likely reach back in the memory bank and pull up the different things I have gathered from those experiences, and post them here.
One thing is for sure; I have definitely had my share of failures and successes with trading. It’s somewhat of an addiction, and yet a cathartic activity at the same time, because it teaches you how to face up to yourself, and your emotional weaknesses. If you don’t know what I’m talking about, it’s probably because you’re either new to the game, or you haven’t lost enough money yet to understand.
One thing I want to establish from the onset is that the stock market is not primarily driven by analytical factors such as P/E ratio, earnings per share, book value, dividend yields, cash flow, on & on…point blank, the thing that makes the markets tick is human fear and human greed. End of story. Fear and greed are the main drivers of market prices. That’s as plain as I can put it. Although you can gain some decent insight into a stock by evaluating its financial statements (e.g., 10-Q, 10-K, etc.), you have to realize that markets move more based on what people are THINKING a stock will do than what the company has reported. These expectations are often reflected in sudden spikes and sharp plunges in stock prices. These distortions are often completely irrational and unfounded, but yet they happen all the time. There’s no such thing as an “efficient market”. The very inefficiency of the markets is the reason why they’re still in existence. But, I digress.
I know that I’ll end up sharing a lot of my market philosophy, and especially aspects of technical analysis, because the bottom line to investing in penny stocks (other than the bottom line I already mentioned) is that ultimately, price action is king. I have learned this through many years of experience, and many good and bad trades. Hopefully you’ll stick around long enough to possibly glean something from my experience in how to recognize when to buy penny stocks, and then hopefully sell them for a profit. Another variation of this is knowing when to short penny stocks, and then buy them back later for a profit. That’s a whole other post that we’ll have to save for another time…more to come after a little while. Until next time!