1. If the news doesn’t make you say WOW, it’s NOT a cash cow.
If you read a press release, and you have doubt in your mind whether or not it’s going to turn out to be a good play, chances are it’s not. The news has to be good enough to make you say “wow”. It can be related to a current trend, it can say revenues increased
100%, it can say it has partnered up with a major corporation, etc. Press releases saying we increased revenues by 5% and cut costs by 3% isn’t going to cut it.
Remember, if the news doesn’t make you say WOW, it’s NOT a cash cow.
2. YOU and YOU ALONE should make all your decisions independent of other people.
What happens when you start to listen to other people telling you to buy this stock is that you play into their hand. They have a reason for wanting you to buy this particular stock. Nobody is nice enough in this world to say, here, invest in this stock and you’ll make money, all for free. Rule #1 in economics, there is no free lunch.
These people can be VERY convincing and hide behind the mask of the Internet in message boards, forums, and chat rooms. Make all your decisions by yourself. That way, you and you alone take full responsibility for your actions.
YOU and YOU ALONE should make all your decisions independent of other people.
3. Have a pre-set stop loss percentage
Chances are, if a stock is tanking, there IS a reason. Don’t try to rationalize by saying it’s going to go back up, because 9/10 times,
its not. Trust me. I know. That’s how I learned all my mistakes. You might make some too, so set a stop loss percentage. For example, if I lose 10% of my original investment, I get out. Tomorrow is another day. Don’t fume over it. Swallow your pride
and accept the fact you made a mistake. Nobody’s perfect. I make losses on some investments at times too. Just make sure you make more gains than losses and you’ll be all right.
Have a pre-set stop loss percentage.
4. Don’t Hesitate and Never Chase a Stock Up
If you’ve done your research, DO NOT HESITATE TO BUY THE STOCK. That’s what this book is for. To give you the confidence so you won’t hesitate. Hesitating means that you’ll fight yourself and eventually give in and buy only to have discovered you bought at the highest point of the wave. That has happened to me numerous times. If you did your research and it’s good, don’t hesitate. After it’s bought, DON’T worry. Just get your profit and split.
Another sub rule of this is to NEVER CHASE A STOCK UP. Sometimes, you may enter a limit order on a bid price and by the
time you submit it, the bid price may have gone up due to huge demand. You change your order, accounting for the new bid price and submit again. The bid price has gone up again. If you keep on chasing the stock up, you may have bought on the highest point of the wave. If you cannot catch the bid price within two tries, don’t bother chasing it up. There will be another play later on.
Don’t Hesitate and Never Chase a Stock Up
5. Have a Realistic Pre Set Profit Percentage Gain
I’m only going to take profits when my stock goes up 100%! Get real. Your profit percentage gain and risk of losing money is directly proportional. The higher you set your profit percentage gain, the higher your risk of losing money will be. Set a realistic goal. I make mine 10% for everyday trades and 20% when it comes to trends. I can afford to take higher percentage gains on trends since the demand is so high. 10% may not seem a lot, but 10% daily for a month can really add up. It is a nice safe percentage gain and can easily be made on a daily basis.
Have a Realistic Set Profit Percentage Gain
6. Learn from your mistakes
You will make them. I’ve made a lot. The reason I’m successful is that I’m learning from them. If you made a mistake, FIND OUT WHY. The reason may be because you got greedy and held too long, or maybe you held too short, or maybe you picked the wrong stock, or you forgot to do one aspect of your dd.
You WILL make mistakes. What separates winners from losers are those who learn form their mistakes.
Learn from your mistakes.
7. Study the market everyday.
After the market closes, spend about 30 minutes each day going over the top performing stocks. This is where the tools I described earlier are extremely useful. It’s an education in itself. You pull up the top 400 stock, and sort by % change. This will give you the greatest percentage changes that have occurred in the penny stock market. Find the ones that have had the greatest percentage gain and find out why. What was the catalyst? What was the high point of the day? Would I have bought it? When would I have bought? When would I have sold? etc.
Study the market everyday.
8. Do NOT use money that is needed for bills.
You’ll be emotionally attached to your money and make stupid decisions. It puts enormous stress on you and pressure that will
alter your judgment. You need to use money you don’t need. How do you get that money? There are several ways. Don’t drink that latte in the morning. Save your lose change. Build a home gym and quit the gym membership. Drink water instead of soda. Pack your lunch to work. There are tons of ways to come up with cash. Just make sure its cash you don’t need for bills for rent, car,
insurance, food, gas, water, etc.
Do NOT use money that is needed for bills.
9. Always stick to your rules
You should always have a list of rules that include your maximum profit percentage gain, your maximum stop loss percentage, your rules for determining whether a stock is worth investing in (maximize demand, minimize supply), etc. Always stick to your
rules because they are there to protect your capital. ALWAYS.
ALWAYS STICK TO YOUR RULES
10. Never buy when there is a huge spread between the bid and the ask.
For example, if the bid is $0.05 and the ask is $0.10, that would mean in order to buy shares, you would have to buy at $0.10. If you wanted to sell those shares, you would sell them at the bid, which is $0.05. You would lose half your money. In order to break even, you would have to wait until the bid moves up to $0.10.
You will find that on plays where there is lots of volume, which is what you want, the bid and the ask will be tight (i.e. 0.09/0.091). That is good. You do want a tight bid and ask. That will give you more control over your money.
