When you’ve {been with us} the penny {trading} block {so long as|provided that} I have, {you obtain} pretty {fed up with} hearing {exactly the same} lies {on offer} {over and over}.
While I’m long {at night} point of falling victim to these schemes, what I hate is {they have} the potential to discourage my trading challenge students from getting active with trading – or worse, send them down {the incorrect} path that’s {likely to} waste their time or money.
Don’t fall victim to the lies! Learn {the reality} by reviewing {the next} seven biggest lies you’ve been told about penny {trading}:
Table of Contents
Lie #1 – {You will need a} huge account {to begin with}
If you’re {thinking about} buying into blue chips, yeah, you’re {have to} a serious {sum of money} on hand {to begin with}. As I’m writing this, Apple is trading at $128.46. {In the event that you} wanted to {have a} worthwhile position with {the business}, you’d {need} tens {as well as} {thousands} of dollars {to begin with}.
But {very cheap stocks} {certainly are a} different breed. If the stocks you’re buying or shorting only trade {for some|for a couple} dollars a share, your small brokerage account will go {a whole lot} further. It’s {sort of} a no-brainer. {In case you have|For those who have|When you have|Should you have} $1,000 {to get}, you’re {likely to} {have the ability to} buy a {many more} shares of a $1 per share company than one with share prices above $100.
{In the event that you} don’t have {big money} {to begin with} with, you can’t let that stop you. I’ve always said {that} you need {to begin with} with {very cheap stocks} {is really a} brokerage account with {less than} $500, an {web connection} {plus some} time – and I {the stand by position} that.
Don’t {trust me}? {Browse the} story {of 1} of my best students – Tim Grittani. He got his {focus on} just $1,500 he {were able to} scrape together, {and today} he’s made {a lot more than} $2.5 million as a trader. This young penny stock trader started with just $2,200 and he’s {around} $300,000+ {in only} {a couple of years}.
(PS – I’m {searching for} my next student {to greatly help} hit the one-million-dollar mark. {Might it be} you?)
Lie #2 – {You have to|You should} learn everything {there’s} {to learn} about trading
If you’ve never traded {an individual} stock before, {getting started off with} penny stocks {is most likely} {likely to} feel overwhelming.
But {i want to} {enable you to} in on {just a little} secret…you don’t {need to} learn everything {there’s} about {daytrading} {before you} start being profitable…these free penny stock video lessons will put you {on the right course} {to begin with}!
My students {earn money} {in several} different ways. {A number of them|Many of them} buy pumps, {while some} short them. Some students trade NASDAQs with momentum, others buy into earnings or contract winners.
{Must you} {understand how to|learn how to} do all that {merely to} get started? {Needless to say} not!
I’m partial to shorting {very cheap stocks} ({I assume} they suit my cynical nature), but my student Tim G. prefers to only play price action. We take {very different} approaches, but we still {earn money} – because {we realize} the patterns {that produce} these stocks work.
What I’d recommend is this…Get {to learn} {each one of these} different tactics on {a simple} level. {Find out} {the essential} mechanics {of every} approach, {but} pick the {one which} makes {probably the most} sense {for you} or {that suits you} most. Study only that approach {and soon you} {feel safe} enough ({and also have} enough cash {readily available}) {to use} mastering another strategy.
Lie #3 – Annual profits of 15-30% {certainly are a} good goal to {shoot for}
{In the event that you} {speak to} any hedge fund or mutual fund manager, they’re {likely to} {let you know} that earning 15-30% {per year} {is a great|is an excellent} goal.
{Which may be} true if you’re {coping with} a million dollar portfolio, {nonetheless it} just isn’t {likely to} {be adequate} when you’re {coping with} {very cheap stocks}.
{I want to} put {a couple of things} in perspective for you…Let’s say you’re {getting started} with a $5,000 portfolio. Assuming you make no other contributions {back}, it’s {likely to} take you 21 years before your account reaches $1 million in value {in the event that you} earn a 30% rate of return and 38 years {in the event that you} “only” hit 15% growth…you’ll be as old as Warren Buffett by {enough time} you’re a millionaire and inflation alone {will most likely} {cause you to} middle-class {at that time}!
Oh – and {merely to} put this into context, {even though} S&P 500 topped 30% returns in 2013, its annualized return between 1926 and 2013 {is} about 10%. Since {a lot more than} nine out of ten professional money managers {neglect to} beat the S&P 500, it’s {likely to} take even longer {to show} {a little} account {right into a} million dollar holding through traditional {currency markets} investing.
I don’t {find out about} you, but I don’t {desire to} wait that long!
{I wish to|I would like to} live the millionaire lifestyle now – not in 40-50 years, when I’m {more prone to} be stuck in a hospital getting my hips replaced than traveling {the planet} and enjoying life…and {I REALLY LIKE} my trips like these:
When you’re {you start with} {an inferior} account, {you will need} bigger wins {if you would like} your portfolio {to cultivate} quickly. They don’t {need to be} huge (my average profit per trade {is merely} $2,000), {however they} do {need to be} {larger than} what you’ll earn {together with your} average mutual fund or ETF.
Using my strategies, I {could} rack up a 174% return in 2014. Professional money managers will {let you know} those {forms of} returns aren’t possible, but my experiences – and {the approach to life} I’m living now – {show them to be} all wrong.
Lie #4 – {You ‘must’ have} a diversified portfolio
{Once you} {speak to} traditional money managers, another big lie you’ll hear is {you’ll want to} diversify your portfolio.
Ok, if you’re socking away $250 {per month} {right into a} retirement account and hoping that’s {likely to} {look after|care for} you when you’re old, {you might like to} {pay attention to} that {little bit of} advice. {The final} thing {you need} {would be to} have your portfolio {destroyed} {by way of a} major market dip {before} you’re {relying on} that money {to offer you} your only {income source}.
({Problem}, Great Recession??)
But if you’re {on this website} {to begin with}, you’re not {considering} providing yourself with a meager, bare bones salary in retirement. You’re {thinking about} building {the type of} generational wealth that’ll leave a legacy {for you personally}, your children {and also} your grandkids.
You can’t apply {the type of} wisdom that builds {a well balanced} retirement portfolio to your penny stock trades, {as the} goals of {both} are so different. Building real wealth through {daytrading} {takes a} different {group of} rules, {and something} place this {is necessary} is diversification.
{A very important factor} that surprises {a lot of} people is when I {inform them} that, when I hold positions in {very cheap stocks}, I typically only have shares {in a single} or two companies {at the same time}. Often, I don’t have {an individual} position active at all!
{Very cheap stocks} are so volatile that good positions only come around {once in awhile}. {EASILY} forced myself {to carry} 15-20 positions – {merely to} be “diversified” – I’d lose {large sums} of money, because {you can find} simply never {that lots of} good companies at play at {everyone} time.
Losses early {in my own} trading career taught me how important {it really is} {to truly have a} {group of} rules and {adhere to} them – {regardless of what}. I don’t compromise them {to meet up} some arbitrary standard of diversification, and {I would recommend} you do {exactly the same}.
Lie #5 – {It requires} 40-50 years {to become} millionaire
This myth {ought to be} {just about|virtually} busted {right now}, but let’s review…
{If you need to|In order to} {be considered a} millionaire in 40-50 years, take $5,000 and put it into an index fund tracking the S&P 500. Do nothing to the account but wait, {and when} past return trends hold true {later on}, you’ll have your $1 million {half of a} century from now.
Don’t {desire to} wait that long? If you’re {you start with} {handful of} capital ({that i} assume {you’re} if you’re {considering} getting into {very cheap stocks}), {you have to|you should} take bolder action.
Bolder doesn’t {indicate} riskier. Everything I’ve {learned all about} penny {trading} {in the last} 15 years makes me pretty confident {that whenever} I {visit a} setup I’ve {handled} before, {I understand} {steps to make} money on {the offer}.
Using strategies that {make the most of|benefit from} these patterns {can help you} {turn into a} millionaire {in only} 4-5 years. {Your task} can’t {do this} {for you personally}, and neither will traditional “buy and hold” investing approaches.
Obviously, that’s {not just a} guarantee – {in the event that you} {study from} me, {but} don’t apply what I {educate you on}, you’re {more prone to} lose everything than {to become} millionaire. But if you’re diligent in applying {everything you} {figure out how to} your trading and meticulous about {carrying out a} plan, {this type of|this sort of} portfolio growth {is completely} possible.
Lie #6 – {You need to} {select the} right stocks {each and every time|each time}
Nothing {could possibly be} further from {the reality}!
I’d {want to} {let you know} that I win every trade I make, but I’d be lying. {The truth is} that I win {nearer to} three quarters of my trades, {and also} my best trading challenge students only average a win rate of 62-72 percent…see examples HERE and HERE
{The trick} to my success isn’t how often I win – it’s that I’ve learned to transform my losses into learning opportunities.
{Just how} I {consider it}, the market {includes a} tuition. When {I’ve} {a little} loss, that’s {the price} {I must} pay {to understand} {a very important} lesson {to use} to my next trade.
{Could it be} fun? {Needless to say} not! I’d {want to} win {completely} of my trades, but since that’s {just about|virtually} impossible, I’ll {accept} taking my wins when I {have them} and learning what {I could} from my losses.
Lie #7 – Good traders never lose
See above: good traders who never lose don’t exist!
{I am hoping} it doesn’t {appear to be} I’m encouraging {one to} take losses. I’m all for learning opportunities, but I’m also all for minimizing my losses {in order that} {I could} keep building my portfolio and enjoying {the approach to life} it affords me.
{So when} it {boils down} to it, {the very best} tip {I could} give you {would be to} {learn to|figure out how to|discover ways to} cut your losses quickly.
Stock traders {will get} into {a variety of} trouble {if they} start letting their emotions dictate their trades. You {love} {a specific} company’s story, or you don’t {desire to} take the hit to your ego that {originates from} admitting {you’re} wrong {in regards to a} particular stock’s movement.
But that’s trading {together with your} heart, {rather than} {your mind}.
{Once you} trade {together with your} head, you {notice that} it’s all just numbers. {So when} you {visit a} loss coming, you don’t {hang on} for emotional reasons – you cut your losses by {escaping .} {as fast as possible}.
It’s a rule that’s unfortunately difficult {to place} into practice in {true to life}, but it’s {one which} you’ve {surely got to} learn. Say it {again and again} to yourself {once you} {sit back} to trade, print it out and put it up by {your personal computer} – hell, tattoo it {on your own} arm {in order that} it’s {the very first thing} you see {once you} {awaken}.
Learn – and apply – {that one} rule, {as well as your} success as a trader {will start} falling into place.
Have another penny {trading} lie {to increase} this list? Leave it in a comment below!