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fundamentals, technical analysis, diversity, attention to detail and the willingness to stick with a plan are all reasons for our success. |
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trading say, the NASDAQ 100. Trading huge companies requires huge capital, tiny 2-15 percent profits can add up over time. When trading micro caps we look for profits more like 100-1000 percent. Our strategy typically holds positions over night and even months. Don't think your just going to buy a stock once and double your money in an hour. We usually buy a stock several times at lower and lower prices. This is called averaging down and wall street wants you to have nothing to do with it. We only trade companies that have solid fundamentals, a growing business model, and high liquidity. We always get out when any of these things change. We break our capital into at least 10 equal parts although 5-10 will be sufficient. Even if you only have $500 dollars, trade in 100 dollar increments. Low trading costs allow you to do this especially when were looking to at least double our money. Also we like to always have a significant portion of cash available at all times. Here's an example. You have $5000 in your account. Stock WXYZ has a good business model, not a lot of debt and increasing volume. The stock pulls back from a recent run up by 50 percent or so. You decide to get in at $.03, buying 16000 shares or so with $500. You see that the stocks recent high is $. 06 and it's not so recent low is $.01. Your next stop is either at$.06 where you take half profits or at $.02 where, if nothing has changed fundamentally you buy another $500 dollars worth giving you an average of about $.024 with 41000 shares. Now it only has to go to $.05 to double your money. You can see how this can last a while. Our strategy should not be confused with the "scaling down" or "dollar cost averaging" techniques that so many new traders get involved with. We diversify, and when the time is right we bulk up our positions. We don't arbitrarily buy and sell at preset price's or dates, we treat each investment differently. Now lets talk about volume. Penny stock share volume is practically useless. We need to look at dollar volume to gain a true perspective on liquidity. The number of market makers participating in providing liquidity for a specific issue is also important. Market makers will flock to the most profitable companies. We look at number of trades per day in a security as the number one indicator of liquidity. A stock must consistently trade over 100 times a day for us to look at it. There is something to said,however, about boring stocks, we look at longer time horizons for lightly traded issues. We mainly trade over the counter bulletin board stocks as well as the occasional NASDAQ small cap, AMEX, pink sheet and even listed stock. We generally look at stuff under a quarter, but we will go up to two dollars. We have a minimum of $.001 as a criteria because this is a super dangerous level. Stocks seldom come back from these levels and investors often go there as a last resort. The over the counter bulletin board is similar to what the NASDAQ once was. The NASDAQ has become overrun by ECN's that charge an extra fee for you to get at tiny price increments that are rejected by market makers. Because of this, stocks will trade between $.42 and $.43 for weeks at a time. The same thing is true over on the AMEX. The OTC BB, however, lets you pay a market maker pretty much any increment for no extra charge. There are ECN's in the OTC BB but they are far less prevalent. These are all part of bigger ECN's and you can pick them out on the level two because they typically only provide liquidity on one side or the other. OTC BB stocks can trade between $.02 and $.50 for weeks. Pink sheets are completely different. There is no level two screen so one must read the tape very carefully. Market makers in penny stocks make a killing because day traders hand over tons of money for an issue as it sky rockets and then they buy them back from the same fools at ridiculously low prices, sometimes even lower than before the good news came out. MM's keep a certain inventory of shares in their stock and make money as it moves both ways. Sound familiar, kind of like averaging down. We play the game as if we were a market maker always waiting on the bid or ask. We don't always get it but we get close. Always feel out the market in between the ask and the bid because the level two does not always represent the best price. Again, reading the time and sales is the most important skill to have. So why not subscribe to our newsletter for less than the price of one commission. Watch and learn for a little and jump in when you are ready. At first you can get in on one stock at a time and soon you be trading everything we do. We are entering and exiting positions practically on a daily basis. Don't just order a service that sends you useless stock picks, join our team that is in it for the long hall. Our newsletter is posted every Wednesday by 6:00PM EST and takes advantage of recent developments so you can start your trading week off right. Go ahead give us a try, we know you'll be glad you did. Subscribe Now! |
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