I was just thinking about something that completely blew my mind…here it is, September 11th, 2010, 9 full years after one of the most tragic events in American history, and in a way it brings back a semi-positive nostalgia for me—not because of what happened to the Twin Towers, but because I started penny stock trading immediately after 9/11 hit. I had been doing research for months before that time, and had even bought my Ted Warren book “How to Make the Stock Market Make Money for You” at that time and was heavily reading it and learning about the accumulation, markup, distribution, etc. phases, and really getting a feel for what trading penny stocks is all about. I was such a rookie back then. I actually believed that I was going to be a multi-millionaire in a year’s time with penny stock trading. Man, was I wrong. Many people ask whether or not these so-called “penny stock fortunes” even exist—in other words, has anyone really ever made it big with trading penny stocks? Believe you me, there are a plethora of stories out there of people doing just that, and it is entirely possible, but you have to remember, patience is the name of the game. So many people fall into the trap of the “get-rich-quick” mentality due to the relative ease with which you can make money trading penny stocks, and thus they discount the importance of operating in strong personal discipline and having a trading plan that they stick to no matter what. It is indeed important to know what you’re doing, and to have a plan before going into any penny stock trade, and sticking with that plan no matter what. If you can stick to your trading plan even when you have five losing trades in a row, you are a true trader. So many traders “chase the market” once their position starts showing a loss, because they feel like the market “owes them” that money, because after all, they did so much homework before putting on the position that they can’t be wrong, right? WAYYYYY wrong. You have to learn to take what the market gives you, cut your losses, and let your profits run, which, by the way, is one of the hardest things on Earth to do. And why is it so hard? Because most of the time we want to be proven right instead of really wanting to make money. Yes, it’s true, that most traders on a deep psychological level care more about being right than they actually care about making money. As crazy as that may sound, it has proven itself over time to be true, and that’s one of the driving forces behind the statistic that shows that 95% of all traders (no matter if it’s stocks, commodities, whatever) lose money. As one of the most noted trading psychologists, Van K. Tharp, has said, “being right and making money are not always equivalent”.
So are penny stock fortunes attainable? They are if you don’t have a “treasure hunter’s” mentality. I see many traders doing things in the markets that are the mental equivalent of some dude strolling around with a metal detector, looking for hidden gold in his backyard or whatever. They want the home run. They want the “big score”. They want to brag about how they bought a stock for five cents a share and then it went to ten dollars a share or whatever. Truth be told, this can happen (and probably has happened many times over), but don’t think that you can be some undisciplined dreamer and be consistently profitable in the markets. Right now, the big talk is that everyone should “stay out of the stock market”. I hear talk all over the place about the stock market being a bad place to put your money right now. That’s true, but only for people that don’t know what they’re doing. If you believe that the way to go is to plow your money into some index such as the DJIA or the S & P 500, then yeah, maybe you should sit on the sidelines. But in every market, in every point in history, there are always those few stocks that “swim upstream” and completely defy the stock market’s overall trend. There’s always the diamonds in the rough that shine brightly, even if their whole sector is lagging. These opportunities present themselves on a weekly basis, and I’m not even kidding. You just have to know how to spot them. My suggestion, as always, is to study your price charts and learn how to recognize chart patterns. The penny stock market is literally overflowing with stocks that have solid formations and that are primed for a rise, in every economy. Be willing to discipline yourself and take the time to really learn how to read penny stock charts, and then take a well-balanced, level-headed approach to your capital management (i.e., don’t “bet the farm” on one trade), and you will do well in the markets. But trading is not for everyone. Jesse Livermore, one of the greatest stock traders in the history of the game, had this to say: “The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.” I couldn’t agree more. Self-discipline is the name of the game. Ninja Trader Guy, over and out.
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