I do have a fetish for trading books apparently. Especially ones that are more rare to collect. So I'll probably be purchasing that one from Amazon in the near future. I am too scared to think of all the retained-earnings I have contributed to Amazon's shareholder's equity to date.
Are you saying that stock trading is your only source of income or that you trade stocks exclusively and no other financial instruments like futures, options or forex? How many decades?
The two keys to penny stocks are good management and very high turnover identification at some points which ID’s insto involvement. I’m attempting to lay the groundwork here on Penny stock trading, so bare with me. When it comes to directors, there are instances where there is quality. Instances that I can think of; A large company is bought out and directors decide to set up another IPO. A company decides to split off part of its business into a new venture and some directors split off into the venture. An unlisted company has savvy directors who decide to start an IPO. Young smart entrepreneurs, well connected who just get it right and start an IPO. Speaking GENERALLY, Penny stocks do not have quality management. instos avoid. Turnover is low. When you see very high and prolonged turnover expect instos have become involved. In which case Prices will run up hard on news. Price will peak and run down again. Price will bottom out. Price will run again. There will be repeats of crest and valleys price and volume surges. As a trader, once you identify something as high potential, you could buy and hold, or you could continually trade the trends. With a ‘quality’ penny they can surge in different manners. On the initial break out, run very hard and then plunge suddenly. They can run hard for a while before they drop off. The retracements can be severe and long. The retracements may or maynot be severe and of short duration. But one thing is a near certainty, they will run hard and fall, often dramatically, it’s the nature of pennys.
We now get more into the nitty gritty of trading. Remember, these are my opinions only, it’s not gospel, you do your own homework. First off you need tools to do the job. You don’t need much, there is beauty in simplicity, as some ET posters keep repeating, “KISS”, that sums it up. Required is 2 spreadsheets to do the job properly. One spreadsheet lists all companies on your exchange and a brief description you have given them. A bit of work initially but not too much. Alternatively every time a stock comes up on your radar (stock screener) having met criteria, do it then, one at a time. The 2nd spreadsheet you keep track of all the hot to trot contenders. Because hot to trot stocks often run hard, then fall hard for a while, on this 2nd spreadsheet you plot about where you guess it will roll over and set a price target for entry. That’s how I trade pennys. If they have a blowoff top, then I exit and IMMEDIATELY set a re-entry level which may often be weeks away. That’s another beauty of these things, they fall away dramatically, the crowd lose interest, get distracted, forget the penny stock and the stocks fall to juicy re-entry prices. So in total: You need one computer and monitor. 2 spreadsheets Access to free web based stock screener, 20 minutes delayed is fine Brokerage account Hopefully your broker offers free live intraday charts Access to DOM from your broker USA figures may be slightly different, you need to trial and error my figures and it's only my opinion, you do whatever you like, this is just a guide. USA and Australia have similar wage incomes, the only difference is that the US has more traders due to higher population, but retail trade sizes on average may be similar. Does retail regularly place $100,000 trades? No! Well that’s what we are hunting. More on this later. First off though, what we are looking for are stocks doing minimum $3mil per day which the screener will find. I set a minimum of $50mil, max $20Bil Cap size on my screener. You need to let stocks run throughout the day without getting greedy and twitchy to buy. The ratios of smaller the cap and the higher the turnover is what you are looking for. Once you identify something, switch over to 1 minute live charts and look at trade size per minute. We want to see numerous +$100,000 trades going on throughout the day frequently. A couple here and there is not good enough, that is not instos drawn in. Instos will hit it big time, remember these are penny stocks which move fast, instos don't ease in quietly on penny stocks. On a great news event it all goes “bang”! Ok so we have a conundrum, stocks moving fast, but needing to let the day play out. With experience after the first hour or so you will be able to gauge whether this is super strong turnover of instos or bs turnover of pump and dump. Remember, P&D is retail, they don’t have $100,000 trades going in furiously per minute. Next thing is check DOM If DOM indicates scores of buyers and maybe scores of sellers at each level, this is a little more confirmation. If you only see a dozen buyers & sellers at each level, be careful, but double check turnover. I have seen days with high turnover and low DOM #’s, but it's rare. Do you chase a hot running stock? In the first day probably yes, depending on price and how much % gain it’s done. If the turnover is very strong chase it imo. Remember this blast comes from a news event so check that out to see whether it is highly newsworthy event. If it all happens to a stock which has already run hard for several weeks or months, then I’m inclined not to chase it, wait for it to pullback which may mean waiting some weeks or months.
What I do if a stock could be doubtful or it has run too hard but the turnover is very high, I'll place a very small trade, at least I'm in, if it falls away I don't lose much.
Here's a penny stock I have been in 6 times since June 2020 with the following profits after brokerage; 81.5%, 99.4%, 129.5%, 127.6%, 113.2% and 78.4%. I entered a couple day back for the 7th time and still holding. Scale on RHS is percentage, these are daily bars. The first months average daily turnover after the breakout was ~$6mil per day and was ~ 40c on breakout. This stock is now over $5.00
And another which has done 8000% in a few months. Now this stock I dislike, I think it's a con, but nevertheless it has motored. The breakout started at ~ 15c and now is just below $10.00, nearly hit $15.