How To Trade Penny Stocks Using The Percentages

How To Trade Penny Stocks Using The Percentages

Although we offer trading course products such as the Paradigm Shift Trading System one of the main purposes of this website is to teach you how to successfully trade penny stocks. Our flagship product is called the Penny Stock Prophet. It is an advisory service that, based upon a study that I completed recently, actually has an 82.4% success rate across a 5-month period. That means that 82.4% of the trades were successful at the highest price, usually the first day, during the 3-day period that each recommendation was followed.

While James Connelly, a.k.a. The Penny Stock Prophet, knows how to pick them, many beginners don’t know how to actually make money with his picks.  Because of that, they may be missing the profit opportunity of a lifetime.

Unfortunately, many beginners make all the beginner mistakes… They will “get in” too late and get out too early or wait way too long to sell and end up taking a loss.  It doesn’t have to be that way!

I’m going to lay out some rules that might be able to help you actually avoid some of the major pitfalls that beginners run into when trading penny stocks.

Commissions

Please note that for all examples on this site, we neglect commissions.  This is because commissions are so variable that it is impossible to give you an accurate analysis of any trade if we include commissions.  Feel free to modify our numbers based upon the commissions that you actually pay.

The Percentages

It doesn’t matter how good your stock picking is, you are still going to take some losses.  The trick to making money in spite of the losses is to always have enough winners to offset all of the losses and still leave you with an acceptable profit.

Let’s say that I have $1,000 that I’m using to trade with and I have a reasonable expectation of making 20% each time I execute a successful trade (this is reasonable expectation, by the way, using the Penny Stock Prophet Advisory Service.  We actually did a study across 5 months of recommendations; see the article at “Does Penny Stock Prophet Make Members Money?”).  That means that for each successful trade I will make $200.

That’s nice, but what about losses?  If you look the numbers in the article I mentioned in the previous paragraph you will notice that 82.4% of the trades were in positive territory at the high on the first day of trading.  Unfortunately, there is no way that you can predict which of the stocks will not be profitable but you can be observant and manage your risk.

Risk Management Rules

I’m going to share some of my rules that I have learned through around 40 years of trading stocks and options.  If you use what I talk about and you take a loss, it is your responsibility, not mine.

Here are some rules that I think will help if you execute them as I intend for you to do…

• Never buy if the recommended penny stock isn’t moving up on the open. You may miss a point or two of profit by delaying a minute or two to buy.  But, that may save you from a 10% or 15% loss or worse.
• Have a preselected stop loss point.  I would actually put the stop loss order in… especially if you can’t sit and watch it. Penny stocks tend to move fast so make sure you make your stops tight enough (like 1% or 2%) so that you will get stopped out before it begins to accelerate to the down side.  I’ve gotten “trapped” in more positions than I care to admit to by not obeying this rule.
•  Have a preselected sell point.  This should be a percentage.  For instance if you pay 10 cents per share a 20% sell point will be at 12 cents per share. If you have the luxury of being able to watch the stock move, you may want to let it go past that point for an even bigger profit.
• If the stock reverses its price action (in other words suddenly begins to go down) or stops moving up before you reach your preselected sell point immediately sell your position.

If you want to actually start a successful penny stock trading career, I think you should try Penny Stock Prophet.  The advisory service has a track record which is something that most of the people who whine about the Penny Stock Prophet probably don’t have. It’s not about what they think about the advisory service…

… It’s about how much you will make.  I did a study on Penny Stock Prophet’s actual results… It’s Fact…

… The Penny Stock Prophet is successfully picking the stocks that are about to move up and based upon my study of his actual results he does so over 82% of the time.  Give it a try.  If you don’t think that it’s worth a one-time payment of $97 USD after you’ve tried it for a month, tell Click Bank (they handle the money) and you’ll get your money back…usually within 24 – 48 hours.