Which way? Penny Stocks education
- Thread starter themickey
- Start date
I can't recall ever seeing on ET lengthy discussion on penny stocks so I've opened up an opportunity.
I'm a retail stock trader who so happens to know a smidgen about pennies because I trade them quite frequently, just remember these are opinions only. I say smidgen because I'm not professionally involved.
However stock trading is all I do, several decades.
The next section of this thread describes how I trade.
It's the only way I know which has been so successful.
It's not rocket science, many here may already trade this way so nothing new.
But as trading is, this is relatively simple.
I'm a retail stock trader who so happens to know a smidgen about pennies because I trade them quite frequently, just remember these are opinions only. I say smidgen because I'm not professionally involved.
However stock trading is all I do, several decades.
The next section of this thread describes how I trade.
It's the only way I know which has been so successful.
It's not rocket science, many here may already trade this way so nothing new.
But as trading is, this is relatively simple.
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This post will be about doing some work!
Unfortunately I know no method of trading which does not involve work.
I’ve heard many traders (would be traders probably) say they only care about trading share price. They don’t care about news, they don’t care about fundamentals, all they want to do is piggy back on share price. This may work on futures but it DEFINITELY will not work on penny stocks.
There is a very fine line between a dud stock and a good stock and just observing price action will not get you there. You have to do some research into penny stock companies if you think you can make something out of this game.
Another thing before I continue, throw every Technical indicator you use away!!!
Do not trade penny stocks on indicators, a guaranteed recipe for failure!
Don’t ask me to explain, just do a search on my username, I’ve said it all 100 times and I’m not repeating.
However saying that, it’s your life, do whatever you like. if you go belly up, tough!
I’ll explain what I do, you can adapt however you choose.
I have a spreadsheet with every company name on the stock exchange I trade.
Less than 20% of the spreadsheet are stocks which I would consider as being of merit, the other 80% of stocks are garbage imo.
What is updated automatically of the 20% of companies is share price, market cap size, number of shares, average turnover, today's turnover, volume, share price % move.
But 100% of the stocks I have added my description of basically what they do (industry) and any noteworthy observations. These may be how many directors, caliber/experience of directors, any major news events, eg made a major mining discovery and whereabouts, what country they predominantly operate in, foreign ownership/control/directors nationality.
If immediately I don’t like a company for whatever reason, then the description is brief, not much work required. If a company is doubtful then more research is required by adding pros and cons.
I note whether I think this share is worth consideration or whether to pass on it, just by using a lettering code.
95% of the time I get it right that a junk stock is a junk stock.
5% of the time I get it wrong and this is how I determine. I have a criteria (explained later) on stocks coming up on my radar. If the stock is particularly strong I will relook at it in detail. I will check the news, I will check stock announcements, I will relook at directors and sometimes on rechecking I will change my mind and give it a pass rating.
The directors are basically the key to penny stocks, if they are experienced in their field this is a big plus.
What I don’t like in directors is a company run by accountants, politicians, celebrities, brokers, fund managers, foreigners. It’s just me, I prefer to see more technical directors who are ok getting their hands dirty.
Also if for example I see a company full of Europeans or Asians then I’m not interested, I want to see locals only predominantly running a penny stock.
So the work required is to do homework on the companies and by describing usually just briefly some key points, when a Trading stock hits my radar and I’m not familiar with it, a quick check on my spreadsheet will tell me what I know about it from an earlier scrutiny. This saves a lot of time because during the day when a lot of stocks can be hitting your radar at once and you don’t want to be fluffing around going over old ground doing research.
When there are 100’s of stocks, it’s difficult to remember everything.
If the company operates mainly offshore then I get concerned.
For example, operating in Finland or Congo, or Greenland, or Pakistan or Malaysia, yeah, I’m not interested. Also if a company operates in multi country locations I get concerned.
If a company operates in a highly competitive industry then I’m not interested.
These are all homework observations you have to do prior to going into penny stocks.
So in conclusion, a spreadsheet which is like a base to quickly describe the company plus there is that additional information of Price and volume automatically updated which incidently is not required on this sheet, it just so happens I have it displayed.
Price and volume stuff I pull from somewhere else when it comes to trading, more later.
Unfortunately I know no method of trading which does not involve work.
I’ve heard many traders (would be traders probably) say they only care about trading share price. They don’t care about news, they don’t care about fundamentals, all they want to do is piggy back on share price. This may work on futures but it DEFINITELY will not work on penny stocks.
There is a very fine line between a dud stock and a good stock and just observing price action will not get you there. You have to do some research into penny stock companies if you think you can make something out of this game.
Another thing before I continue, throw every Technical indicator you use away!!!
Do not trade penny stocks on indicators, a guaranteed recipe for failure!
Don’t ask me to explain, just do a search on my username, I’ve said it all 100 times and I’m not repeating.
However saying that, it’s your life, do whatever you like.
if you go belly up, tough! I’ll explain what I do, you can adapt however you choose.
I have a spreadsheet with every company name on the stock exchange I trade.
Less than 20% of the spreadsheet are stocks which I would consider as being of merit, the other 80% of stocks are garbage imo.
What is updated automatically of the 20% of companies is share price, market cap size, number of shares, average turnover, today's turnover, volume, share price % move.
But 100% of the stocks I have added my description of basically what they do (industry) and any noteworthy observations. These may be how many directors, caliber/experience of directors, any major news events, eg made a major mining discovery and whereabouts, what country they predominantly operate in, foreign ownership/control/directors nationality.
If immediately I don’t like a company for whatever reason, then the description is brief, not much work required. If a company is doubtful then more research is required by adding pros and cons.
I note whether I think this share is worth consideration or whether to pass on it, just by using a lettering code.
95% of the time I get it right that a junk stock is a junk stock.
5% of the time I get it wrong and this is how I determine. I have a criteria (explained later) on stocks coming up on my radar. If the stock is particularly strong I will relook at it in detail. I will check the news, I will check stock announcements, I will relook at directors and sometimes on rechecking I will change my mind and give it a pass rating.
The directors are basically the key to penny stocks, if they are experienced in their field this is a big plus.
What I don’t like in directors is a company run by accountants, politicians, celebrities, brokers, fund managers, foreigners. It’s just me, I prefer to see more technical directors who are ok getting their hands dirty.
Also if for example I see a company full of Europeans or Asians then I’m not interested, I want to see locals only predominantly running a penny stock.
So the work required is to do homework on the companies and by describing usually just briefly some key points, when a Trading stock hits my radar and I’m not familiar with it, a quick check on my spreadsheet will tell me what I know about it from an earlier scrutiny. This saves a lot of time because during the day when a lot of stocks can be hitting your radar at once and you don’t want to be fluffing around going over old ground doing research.
When there are 100’s of stocks, it’s difficult to remember everything.
If the company operates mainly offshore then I get concerned.
For example, operating in Finland or Congo, or Greenland, or Pakistan or Malaysia, yeah, I’m not interested. Also if a company operates in multi country locations I get concerned.
If a company operates in a highly competitive industry then I’m not interested.
These are all homework observations you have to do prior to going into penny stocks.
So in conclusion, a spreadsheet which is like a base to quickly describe the company plus there is that additional information of Price and volume automatically updated which incidently is not required on this sheet, it just so happens I have it displayed.
Price and volume stuff I pull from somewhere else when it comes to trading, more later.
The best penny stock primer you can find is a book by Alexander Tadich (Ex stock broker from Calgary Alberta) called Raging Bulls "Outfox promoters at their own game on any Penny Stock Market".
It's hard to find but there are a few used copies floating around. Might even be a PDF download somewhere.
Written in 1992 as fiction it cover all aspects of the penny stock markets.
It's hard to find but there are a few used copies floating around. Might even be a PDF download somewhere.
Written in 1992 as fiction it cover all aspects of the penny stock markets.
Why not? The penny stock market is an open auction market. Price moves on how the participants perceive what ever data they gather. To make money you only have to follow price. It doesn't matter why it moves it only matters that it moves.
Lets see; a good stock will increase in price; a dud stock trades in a range or decreases in price. As a trader or an investor your capital isn't earning a return. What else do I have to know? And what good will it do me?
Wait! That’s a Canadian. That means not interested
Hey we mastered penny stock manipulation. Best in the world at it. Might as well learn form the best.Wait! That’s a Canadian. That means not interested
