Penny Stock Industry Report: Untold Secrets Traders Use in Trading Penny Stocks By Peter Leeds
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great deal of wisdom has been learned from the stock market, and trusting that knowledge should help you become a better trader. Whether a tried-and-true tactic to investing, or a truth about how to avoid the big losses, much of this wisdom can quickly and easily help you make a lot more money.
Unfortunately for the pigs, especially in penny stocks, they make their stock market decisions for the wrong reasons. Whether generated by greed or impatience, both of which hold very negative outcomes for investors, their trades over time tend to be weak and poorly played. The end result is a gradual (or rapid) deterioration of their holdings.
You have already heard a few of these nuggets. For example, “the trend is your friend,” “the pigs get none,” and “sell in May and go away.”
Given the lack of success among greedy or impatient investors in penny stocks, the old saying does seem to hold true. While the bulls and bears generally make money, when it comes to penny stocks the pigs in fact do get slaughtered.
When you apply some of these concepts to stock market investing, they may help you capture some big gains, while avoiding the big losses. By using them with penny stocks specifically, you could see even greater profits and avoid even more significant downside. We need to examine each of the most prevalent sayings to better understand their meaning, and to see how they can instantly super-charge your penny stock investing approach.
Bulls make money, bears make money, pigs get slaughtered In this saying, the “pigs” are those impatient investors who want too much too fast, or simply can never have enough money. While their peers (the optimistic bulls, the pessimistic bears) are pulling in profits, the pigs are always looking to catch the next big win.
The trend is your friend This is an expression you have certainly heard before. The trend is your friend doesn’t just rhyme, it also holds true. The idea is that, just like an object in motion tends to stay in motion, a stock moving in a certain direction tends to continue moving in that same direction.
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If shares of a certain penny stock are gradually climbing from one week to the next, that penny stock should continue further into higher territory. If those same shares are falling, they are most likely to continue falling. By observing the trend, and trusting that the shares have a greater likelihood of maintaining that same direction rather than suddenly reversing course, an investor can pull in some significant profits. While applicable to larger Blue Chip stocks, the old saying also holds equally true with small companies which are trading as penny stocks.
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Don’t try to catch a falling knife Too often investors think a stock looks like a bargain simply because it is lower in price than it used to be. While this is not a good strategy, it can sometimes work out for the best. However, there are times when shares of a company may look very inexpensive as they fall towards penny stock territory, based on some underlying issues or problems with the company itself. The expression (or warning) “don’t try to catch a falling knife” means that investors should avoid these sinking stocks which may look cheap the lower down they go in price. Often a penny stock may drop half their value and look like a great bargain, only to fall another 50% from that point. The morale of the story is to avoid stocks on their way down, and avoid the feeling that they are becoming greater and greater bargains as they drop. Wait until the freefall of the shares has ended and the stock has either stabilized and leveled out, or reversed back toward higher prices. At that point, you may be able to pick up shares which are gearing up for another run higher once all the bad news has been factored in by investors, and any operational problems of the company have been addressed.
Be interested in a stock when no one else is Famous investor Warren Buffett said that you should buy snow shovels in the summer, and lawn mowers in the winter. The idea is that when buying out of favor stocks, you will get an excellent price. There will be little buying competition when most investors have their focus elsewhere. In time the seasons will change. Out of favor stocks fall back into favor, and all of the sudden there will be a line-up for shovels as the first flakes of snow begin to fall. Stocks happen to act very much like this, with yesterday’s ignore company eventually becoming the latest “hot” stock. Of course, that may actually be the best time to sell your shares since you will be getting a great price for them.
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