The Big Investing Secret with Penny Stock Trading

– Hey, guys, I wanna tell you
more about stop loss orders. I’ve told you before: this is the most important,
number one tactic when it comes to investing. It’s gonna help protect you from downside, and it’s gonna actually keep you locked in for all the profits when the stock goes in the right direction. Check this out. There’s a few tactics and techniques that I’m going to discuss here about stop loss orders
to give you a better idea of what prices to put your stops at, how to use them, and all the ways in which
they can benefit you. (coins clinking) So this is Joint Corporation and we selected it right here. We gave our buy opinion price of a range between $3.10 and $3.25. So the stock opened here for the day and you could have bought it at that range and, by the end of the day, even after trading almost to $4 that day, it closed right here. Now, the idea with stop
loss orders is you want to protect yourself in
case the stock takes a turn and starts going down dramatically. So, for example, let’s go back
before we selected the stock. I’m just gonna talk about that, just to give you an example of how the stop loss orders can work. Say, for example, you
bought the stock here at $3.95, you would immediately
set up a trigger price or commit to a trigger
price at lower level, so, say, $3.65. That if the stock, for any reason, approached that or actually hit that value and started trading lower,
broke below that price, you immediately sell all your shares, no questions asked, and you get out at that level. What that does is it
minimizes your downside risk, that if you bought here,
the most you could lose is about 5%, maybe 8%, and the upside potential
is much more than that. You could have a upside
of hundreds of percent. Your downside is limited to 5%. So if we talk about here,
if you bought it here, you set a stop loss limit here, the stock would start trading higher, and if it kept on going
up, great, no problem. If it turns around and
does exactly what it did, like this, and your stop loss is here, when it hits this level, you’re selling your shares immediately. So you’re already out of the stock now. You took a little bit of
a loss, 5% or whatever that would’ve been. Then, the stock just kept on going down, kept on going down, and you would’ve been
stepping out of the way of all the downside. A lot of shareholders were
getting killed at this point, but you just took a 5% loss, and, now, you’ve got all the
cash to maybe, potentially, buy back in at these lower prices for a more attractive value. But what we did was,
right here, on this date, we said that our buy
opinion was in this range, and the stock just immediately
started going higher, traded almost as high as $4. But the idea is, say, you
even bought it right here. You would want to set a stop loss in somewhere that’s a
little bit off the stock to try and make up for the
standard day-to-day volatility, but you also wanna keep it tight enough that you would minimize your downside if the stock started behaving badly. So you would probably,
with a stock like this, maybe set your stop loss below $3. And why do I say that? Because the standard volatility
of any stock is going to have it bounce around
a lot during the day. That’s what these wicks
on the candlesticks are. Say, for example, this day,
you can see it opened here, at $3.80, and, during the day, it traded as high as this, but it also traded as low as that, much, much lower, but then came back and
closed at that point. So if your stop loss was too tight to where you bought it at, it’s gonna stop you out. You’re gonna sell your
shares at the minimal loss that you would take, but then the stock bounces right back up, and you basically are just down 8%, and the stock’s back where
it was in the first place. So it’s very important that you do set your stops wide enough to make up for the stocks’
natural volatility, so that you don’t get
stopped out too much. That’s why I like doing
things a certain way with stop loss orders, specifically with a company
like Joint Corporation here, it’s a penny stock, and the thing about penny stocks is that most of the people who
trade them are, generally, typically, a little bit less experienced, and they don’t say, “Yeah, I gotta buy this stock at $4.28.” Or, “I gotta sell it at $3.21.” They go with round numbers. They say, “You know what? I’m gonna sell at three bucks. If it hits $4, I’ll sell it. If it goes to $2, I’ll but it.” So you’re gonna see a lot of buildup around threshold prices,
$3, $3.20, $3.40, $3.50. So it makes it more likely
that there is some support around the $3 range, so that if you’re setting a stop loss, you don’t wanna set it
at $3.01 or $3 even, and keep in mind, I
should say this right now, this is not trading advice; it is simply opinion
about some of the ways that I personally trade and have worked out very well for me, but what you would do in this situation is maybe
you’d set your stop loss at $2.99 or $2.97, just below what would
potentially be an increase in trading volume at that price range, that round number price range at $3 as the stock approaches that, then you might see that the
trading volume increases, but the buying pressure increases, and the selling diminishes, and that’s what makes it a
really good support level, and we have a video on support
levels you can check out. I will also link to that below this video. You go right below the support level, so that it does take a
lot to break through that to then stop out your investment. Typically, when that happens, and you get stopped out like that, then the stock will be, actually, having a lot of momentum to keep on going lower
and lower and lower, and then the stop really
worked out really well for you in that scenario. Now, before we get into a bunch of other stocks I wanna show you, I’m going to just really give
you a super quick refresher on how candlestick charting works just so you know what you’re looking at, and just two seconds for
people who already know it, just stick with me for one more second or one more moment here, okay? The way it works, each of these in this particular chart, this is a one month chart, each candlestick is one day, each day’s trading, and if the candlestick is full, it means that the stock closed lower than it opened, and if it’s clear, then it
means the stock closed higher than it opened. The wicks above and below the candlestick
body are showing you how high and how low the stock
traded during the day. On this particular day,
the stock opened here, traded as high as that,
traded as low as this, and then came back and closed here. Now, a clear candlestick opened here, traded that low, traded that high, but, by the end of the day, closed here. So the candlestick body is clear. This shows you a lot of different things about this ecology of investors and candlestick patterns only work if there’s a strong up
or down trend leading up to that point. So if the stock, like
in this example here, is trading basically sideways, and there’s no real, solid trend anywhere, then none of the candlestick
patterns you’re gonna find will really play out or show you anything that they imply that they would show you. But if the stock is in a strong up trend, and then you see a dodgy pattern or a hanging man or a tombstone, then it’s gonna tell you a lot about what the stock will
probably likely do next. Now, this stock we
selected on October 4th, so that would’ve been right
around here somewhere. And, speaking of stop losses, you’d wanna set a stop loss
trigger price pretty close to where you bought it. Like I said, about, maybe, 5%, typically, but 7% lower, that if
you buy the stock here and your stop loss is at 99 cents, so that you go right below
this $1 threshold price, if the stock does drop to that level, you immediately sell all your shares. Yeah, you take a lot of losses, sure, little losses. You get stopped out plenty of times, but you can take a lot of 5% losses before it’s gonna matter, especially considering that, when you get the stock right, which you will lots of times, the increase is a lot more than 5%. So you need one winner. You can take 10 losers, and, still, if you get one winner, you’re gonna be doing fine. Anyways, the point of
this video is to show you that, as a stock climbed, then, you would increase
your stop loss order, a trailing stop so that
you bought it here, the stock starts doing
well, it’s up to here. Now, you’ve got a 99 cent stop loss order. So you can set this up automatically with your broker, or just keep track of it in your mind, but you have to make sure to abide by it and see it through. If you decide, “Yeah, I’ll
buy this stock at $1 or $5, but I’m gonna sell it at 99 cents,” if it does hit 99 cents,
do not take the time to generate reasons why you
shouldn’t sell the stock, because what happens is people usually don’t wanna admit a mistake, they don’t wanna take the loss, and they’ll talk themselves
out of it and go, “Okay, well, now the downside’s over and it’ll start springing back,” but, a lot of times, the stock will keep on dropping
all the way towards zero, or maybe 25 cents, and if you talked yourself out of it, you’re gonna be kicking yourself, because you should of sold at 99 cents in this example, okay? But as the stock increases, you would want to increase
your stop loss trigger price from 99 cents, maybe to $1.25. At this point, stock’s doing better, you keep raising your stop loss. So what you’re doing is
you’re locking in your gains, because if the stock did reverse and all of a sudden
drop down towards zero, then you sold here at $1.75, even though you bought at $1.18 or so, and you would of locked in those profits. But the stock did not
reverse very dramatically. It kept on going up, so then you would continue
to raise your stop loss, sort of trailing so that
you’re locking in more and more of your profits. Now, the stock traded, on this
day, as high as $3.60 or so. Now, maybe you would raise
your stop loss to about here, and you’re still a lot lower
than the trading price, and you’re protecting your downside. You’re locking in your gains
if the stock does reverse, but, then, look at this day here. I don’t know if I should
bother zooming in, but you’d probably see it. You see that the stock on this day here? It traded as high as this
and it traded as low as that. A lot of people probably
got stopped out on that day, because if you’re having
a pretty conservative stop loss order, say, at $2.99 or so, the stock, during the
day, dropped intraday, as low as just over $2.75. You would of got stopped
out at that point, sold your shares, but then the stock sprang
back all the way to here. Then, you’re out of this stock, you’ve taken the profits, but there is more upside that
you, then, would miss out on. And if you’re doing this properly, and your stop loss is realistic, then just about everybody
would of been stopped out when the stock collapsed like this, and, hopefully, the point at which you got stopped
would’ve been much higher levels, so that you avoided all this downside. I’ll tell you the thing
about penny stocks: if you can avoid and sidestep the majority of the downside, it’s pretty
simple to turn a profit, because when you do get a winner, the win is a lot more significant in terms of percentage than the losses if you maintain or limit
your losses to small amounts. Now, this is Cam Tech. We selected this stock
before this chart began, just a little bit, but this
is just to show you some more about the stop loss limits and some of the things you wanna consider. Now, the stock did incredibly well for us. It’s one of my favorite stocks, and it’s also one of my favorite charts. One of the things you can watch for with setting your stop loss is to get an idea of how close
you should put them, because, sometimes, you’re gonna
wanna put your stop loss really close to the price you paid. Other times, you’re gonna
wanna give a little bit of room or a little bit more breathing room just for the natural
volatility of the stock. You do not wanna keep getting stopped out, because if you buy a stock at $4 and you set your stop at $3.99, a lot of times, just the natural trading during the day is gonna take you out, because it’s gonna go down to $2.80, and then it will reverse
and maybe go higher again, and you’re stopped out. You took a small loss. Then, the stock could just
continually keep going higher, and that’s the worst thing to happen, when you get stopped out
and then the stock reverses and goes higher. That’s a painful thing, not because of the small,
tiny loss you took, but because you missed
out on the opportunity of where the stock was going to go. But this is an example of a
good, strong, gradual up trend. It’s measured. It’s consistent and it’s gradual enough, which is important, because,
then, you can understand that the gains will probably
be able to be maintained. The faster something rises, the faster it comes right back down. That’s why when you see
some of these manias that are throwing stocks up like crazy, then they always come right back down. If you look at this example here, there’s even an example of it, that the stock was ramping higher, and the faster it goes up, the less sustainable the move is gonna be, and the faster it comes back down. What you wanna see, which is preferable, and will be a lot more
lucrative over time for you, is to be involved with a stock that gradually rises over time. Now, you’re gonna wanna set
your stop losses tight enough to most stocks, but not too tight that you get stopped out
more than you should. One of the things you can watch
for is the trading volume. If there’s not a lot of trading volume, then, typically, the stock will plod along in the same kind of trend it’s already in, whether it’s a down trend or an up trend, but then when you see something like this, where the trading volume explodes, and the price also explodes with it, then you know that this is gonna be a little bit more
volatile all of a sudden. You’re gonna wanna set
your stop loss limits little bit wider, give
yourself a little bit more breathing room, and, as you can see here, what would of happened is that
if you had a trailing stop, just wherever my mouse pointer is, let’s say we did that. Say our trailing stop was here, and as the stock price kept increasing, we kept raising the stop loss limit. But, eventually, what’s gonna happen, especially when a stock
reverses like this, then if you don’t get stopped out by this, then you’re obviously not
setting your stops close enough for them to be effective, and don’t look at getting stopped out like the worst thing in the world. It’s a good thing, because what’s happened in this example is that you set your stop
loss and you follow, you have a trailing stop loss, so when the stock does reverse as it did, maybe you get stopped out here. Maybe you got stopped out at seven bucks. That forces you to take your profit, but you can see that you
would’ve avoided all the downside that started from whenever
you did get stopped out, and you see that you
avoided all the downside from whenever you got stopped
out, whatever price that was, and then the stock kept
on falling from there. So if you got stopped out
at $7, just to make it easy, a nice, round number for you, then, you would’ve got out at seven. You still have all that
money, all that profit. Now, the stock’s at 4.50. If you still like it, you think it’s a good buying opportunity, then maybe that’s when you
get back into this stuff, and you would’ve saved
every dollar from 4.50 to 7, where most shareholders would of lost that money over that time. But another thing you can check is the relative strength index. The RSI shows you how
overbought a stock is and how oversold it is, so any value above 70 means that the stock is very much overbought, and, therefore, is somewhat more likely to decrease in price with this next move. Now, if it’s oversold, it means that there’s too many people who are jumping ship on this, and it’s been pushed down to low levels. Any oversold level, any
RSI level close to 30 or below is very oversold. So if you see a stock
that’s at 20 with the RSI, it’s almost certainly
going to increase in price, compared to the chances
of it decreasing in price from that point, and when the price declines so much and the stock is so oversold that we’re looking at
it approaching 20, 25, then, there’s very few
people left who may want out of the stock. Most of them have already sold, and that’s why any regular amount of buying would actually
push the shares higher. But, in terms of what
I’m trying to explain, with the RSI and stop loss levels, if the RSI is very oversold, then, you can be more confident to do a stop loss trigger
price a little bit closer to the current share price. If a stock is trading at five bucks, it’s heavily oversold. It’s probably a lot better
to do a stop loss at $4.90 so that if the stock does
start dropping from there, then, you would get out, and
you can set it a bit tighter than you otherwise normally would have, because you know that the chances are that the stock’s next
moves will be higher. And when I talk here,
I’ll say something like, “A stop loss of $5, a stop loss of 4.50.” That’s just for the purpose
of explaining things to you. Generally, you’re gonna wanna
put a stop loss trigger price below any kind of threshold price. So if you set your stop loss at $4, what I really mean is
probably set it at $3.96 or something like at, because you don’t want
to be too close to any of these round numbers
or threshold prices. Now, bear with me. I’m about to show you how you can look at the volatility of any stock, and that’s going to really
give you a better idea of how to set your stop losses. If a stock is excessively volatile, you’re gonna wanna set
your stops a lot wider, because otherwise a
volatile stock will stop you out a lot more often. I’m also going to explain
that you can be right on 50% of your calls, even if
you’re wrong on 50%, and that’s still a profitable approach. So we’ll get it all out in a second, but let me tell you one
more or two more examples of stocks which are good representations for setting stop loss orders. Now, I have to do this chart. It’s AMD and we picked it before this at a lot lower prices, and it’s done incredibly well. It looks like it might be
doing a double top here. Maybe it’ll start coming
down now a little bit, but, at this point, if you
haven’t taken your profits, I don’t know what you’re waiting for, and that’s when you don’t
even need a stop loss. When you get into a stock
at excessively lower prices, and that’s trading at over $15 a share, how much more are you looking to achieve? Just cash out, take your profits, or even sell half, let
the other half ride. That way, you lock in all those gains, and then you also have
a little bit more skin in the game in case this stock continues to do excessively well going forward. But you could of had a
trailing stop all the way after this stock as it kept on climbing, but you don’t wanna set
your stop too tight. Say, for example, the stock
is trading at this price. You don’t want your stop
to just be like right here or anything like that. What’ll happen, a lot of
times, when it’s too close, is that, as you know,
the natural volatility will take it out, or even
a little bit of a downturn, there’s going to be a ton
of 5% and 10% corrections with any stock, and so, then, yeah, you’re gonna be setting
your stop a bit wider just to account for that, and, then, maybe when
you do get stopped out, if you do, that’s gonna
be a bit of a bigger loss, but it’s kind of more art than science. Every stock’s different. So you’re looking at the volatility. You’re looking at the oversold
and undersold conditions. You’re looking at how much
risk tolerance you have and the stock’s natural
volatility, all of that, take into account to try
and set your stop losses along with the trading
volume and the momentum of the shares. Everything comes into play. So people say, “What’s the recipe? What am I looking for? Where should I set my stop loss?” It’s all opinions. Nobody knows, but you do wanna look at certain factors which’ll
help clarify your exact decision of where you wanna set your stop loss, and where you may set a
stop loss could be different than your neighbor, because maybe they have a
different risk tolerance than you, or they have a different
outlook from a stock. All of that comes into play, but, generally, if you’re
doing stop losses correctly, you would’ve gotten stopped
out right about here, but the beauty of it, one
of the ways that I trade is that if I’m looking at larger companies, I’ll be buying something like GameStop or Cracker Barrel, and
I’ll just buy the stock, and I’ll know that my downside
loss limit is set at 4%, 3%, whatever, and that’s the
most I could lose on a stock. That way, I can buy a stock,
not even look at it again. I don’t set up automatic stop losses. Your broker may allow you to do that, and you can do it,
certainly, with the blue chip and larger stocks. With penny stocks, sometimes, they get a little bit squirrely on that. Also, thinly traded
stocks like penny stocks that are also excessively volatile, it makes it a lot harder to
pick a good stop loss price, so if you have gotten stopped
out on a penny stock before, don’t feel bad about it. You learned something, and now you’re going to
do better going forward, and, sometimes, that’s
just the way it goes. Sometimes, it just sucks
and you get stopped out, and then a stock reverses
and trades a lot higher. Take, for example, if you
bought the shares back here, where we told you to, if
you bought the shares, and then they drop off like this. Now, say you got stopped out here. That’s one of the worst things is to watch that stock then
just keep on going up and up and up, and you got stopped out. It would’ve been a big significant gain, but even so, you’ve lost
all that opportunity that you would’ve achieved. So that has to be a decision you make about how wide you wanna
set your stop losses. The more you’re willing to take
in terms of downside losses, the wider you can set your stop loss, and, therefore, the more likely it will be that you will not even
get stopped out at all, and you’ll be in for the
upside gains going forward. Now, this is Arotech, a stock we brought to our subscribers’
attention when it was trading at $1.48, and it’s done well, also. I wanted to show you the
pretty significant volatility in this stock. If you look at here, this
is a stock who’s trading over $4 a share within three
or four or five days later, it’s trading under 2.75. So you would of got
stopped out there for sure, if you’re doing it properly. A lot of people will
have a mental stop loss. They’ll have, in their mind, “Yeah, you know what? I’ll sell it if it goes to $2.95.” And the stock then hits that price, then they talk themselves out of it, and that’s human nature. I do it myself. Everybody’s gonna do it, but it’s not gonna help you in
terms of using the stop loss to protect yourself from the downside. You have to have no emotional
connection with these stocks. If the stop drops 5%, and that’s what you had
decided you’re gonna sell at, then you do it, and who cares
if it goes to $10 billion after that? You didn’t lose a penny by
watching it go to $10 billion. It’s just an opportunity cost,
which is part of the game. I mean, if you’re playing this game, you’re gonna run into this kind of stuff, and the more that you do,
the more disappointments and losses that you
take, all of that’s part of your education. Look at it that way. Because everyone knows that the first time that I started trading in penny stocks when I was 14 years
old, I lost all my money within two weeks, and that actually is kind
of like going into a casino. You don’t want to go into a
casino and win the first time. You wanna go into a casino
and lose the first time, so you can take it seriously,
and you don’t expect that it’s easy. Anybody who goes into a casino
and they win a huge jackpot on their very first time,
they’re always going to try and regain that kind of feeling. They’re going to think
that going to a casino is where you win money
and you always walk out with more cash than you walked in with. Then, they get addicted,
they get all of that stuff. But, anyways, I gotta
get back on track here. And I just noticed
something on this chart. This is dark cloud cover. These two candlesticks
together makes a pattern where when you see an up day followed by a day where it’s a down day, but it’s a little bit higher
than the previous day, this dark cloud cover is
typically a warning sign on the Japanese candlestick trading chart, which tells you that the stock
price may start coming down. And you can put trust into this pattern, because the trading
volume was significant, and the trend leading into it was obvious. There was an obvious up trend, and you can only use candlestick
trading chart patterns after a down trend or after an up trend for it to be effective and trustworthy. So when you see this
dark cloud cover pattern, that implies that the stock price is gonna start coming down, and that’s exactly what it did. But let’s say, for
example, you kinda notice that there is a little bit
of a loose support level here at the $3.35 range, so, say, for example, you bought the stock right about here. Then, you’re gonna wanna set
your stop loss trigger price, and you would probably
do it immediately below that support level, which
would be about $3.24 or less. So let’s walk through it. The next day, the stock price goes up. I’ll just follow with my mouse here about what would happen
with your stop loss, and then you see the stock
is doing well and doing well, and that downside during the
day might of scared you a bit, but it stopped there, and
you’re still down here with your stop loss, and you say, “You know what? This stock is holding up okay, so I’m gonna raise my stop loss,” and you would raise it up to $3.47 or so. That’s about here. The stock still maintains
pretty good prices, and you wanna lock in some more gains and limit the downside. Maybe you’re scared a little
bit about what’s gonna happen with the stock market, and
you raise your stop up here, a little bit tighter,
because maybe you want out of this stock now. Maybe you have another opportunity that you wanna use the
money to invest into, so then you could get a
little more aggressive with your stop loss limits, and maybe you’re at this level here, and you’re watching the stock, and you expect it to keep on going up, so you’re planning on
raising the stop again, but, then, it has a bad day here. You can see intraday,
it traded about 15 cents below where it actually
wound up closing at, but that might’ve taken you
out with your stop loss order. If it didn’t get you then,
if your price was here, then you would of got stopped
out a couple days later. But the thing is,
remember that this stock, when you first got involved with it, when we first told you about it, was so much lower that,
now, you’re walking away with a huge profit, and you’re also protecting yourself from any further downside. If you look at the longer term chart, then, wow, it’s unbelievable, but to look at the
two-month chart like this, you’re gonna get stopped out a little bit, and the relative strength
index is pretty much flat. You can’t tell anything about
a stock’s future direction with the RSI. If it’s about 40 or 60,
anywhere in this range, it’s not gonna tell you anything. If it’s very oversold or
very overbought, then, yeah, it’s a little bit more reliable. You could also watch
things like money flow, other indicators to get an
idea of what’s happening with the stock, who’s
buying it, who’s selling it, or you see patterns on
the candlestick chart such as a dodgy pattern that tells
you that there’s indecision among investors and the stock is going to change its direction or its trend. All this kind of stuff adds
into the overall recipe. This is an art. It’s not a science as much. The only way to really get into this stuff and to know where to set a stop loss is to look at all of various aspects which go into the potential future
direction of a stock’s price, and, also, to have a lot of
experience in the trenches where you’re trying
this stuff, and, maybe, sometimes you make a bad decision, you put your stock too tight or too loose, and, the end of the day,
you might learn something from that, and, over time,
you become very good at this. The fact that you’re
here still in this video, this far into it, shows me
that you guys are totally going to kick this concept’s
ass, and it’s gonna pay off for you in the short term,
medium term, and long term, all your investing is going
to be way more effective now if you abide by stop loss orders. As I also promised you,
I’m gonna show you guys how to tell the volatility of any stock, because that’s a piece
of the puzzle you need to know when you’re going
to be setting stop losses. Lots of stocks are very volatile. Other stocks are very
unvolatile, so to speak. So you don’t wanna be setting
your stop losses quite so tight with the stocks
that are more volatile. Here, I’m just gonna
show you really quickly. I always like to show you on free websites that everyone has access
to, so there’s no excuses. I want you guys to know this stuff. There’s other tools you can use. You can pay for really advanced techniques and tools and sites and all that stuff. I say you don’t need it. It’s all the same information. Go to Go to Yahoo! Finance, and
notice that we’re not talking about the search bar up here. Let’s talk about the search bar over here. So you look into a stock here, type any stock you want, okay? And, then, it’s gonna give
you some options here. Let’s go to statistics,
and you’ll get some of the information about the stock. Scroll down a little bit. Actually, not at all, you don’t
have to scroll down at all. It’s right near the top. This is the beta. Beta is a number in
relation to the volatility of the overall stock market. 1.0 means that this stock
is exactly as volatile as the overall stock market. So if you see a beta of 3.06,
that means that this stock, AMD, is 3.06 times as volatile
as the overall market. If the beta is 0.50, it
means it’s half as volatile as the overall market. This number, for beta,
shows you a reflection, a relative comparison, of
how volatile this stock is in relation to the volatility
of the overall stock market. So higher beta means set
your stop losses much looser. Lower beta means that you can get away with having a tighter stop loss limit, and maybe only lose 2% or 3% if the stock goes the wrong direction, as opposed to a stock
that’s very volatile, then you’re gonna wanna
give it a lot more space, just like when you see
somebody who’s got tattoos on their face and bolts through their ears and teeth that are made of
gold with diamonds stuck into them, that’s nature’s way of saying, “Do not touch.” With beta, it’s the same thing. You don’t wanna go near a stock that has got too much volatility, unless you are smart about how you set your stop loss limits. I’m not saying don’t go near a stock just because it’s volatile. That’s my bread and butter. I love volatile stocks. It makes it so much better, cuts down on time, your
gains can be bigger, but when a beta is higher, then, your stop loss needs to be looser. There’s a couple things
I wanna talk about, too, really quickly here. If you get 50% of your
stock trades correct and 50% incorrect, then
you can still make a ton of money, because if you cut
your losses really early, you take it like a Band-Aid,
rip it off in one motion, and you take that 5% loss and this 5% loss and this 5% loss, you’re
probably sitting there going, “Wow, I’m taking a lot
of losses very quickly. This kind of sucks.” And you do the math and
it adds up 15%, 20%, yeah, that sucks, but when you do hit a
stock that’s gonna go in the right direction, you’re
not making a 5% or 10% gain. You’re making a lot more than that, especially with volatile penny stocks, you’re not trying to make 5%. We’re not doing stupid spend all day at a computer screen day trading. What we’re doing is we’re
investing in companies and profiting as their footprint expands, as their market share increases. This is the way to invest in my mind. This is the most lucrative way, and, yes, I’ve traded every single way. I’ve day traded. I’ve done derivatives,
options, real estate, and precious medals, and
all that kind of stuff, even a little, little,
little tiny bit in art. The most lucrative way you invest is just to understand business,
and buy into companies that have a business which
is going to increase, and, as it increases over
time, the value of the stocks almost always follow suit, and that’s our philosophy,
and it’s tried and trued, and I’ve been in this
industry longer than just about anybody that I know who’s
trying to tell you anything about this kind of stuff, and, over time, it’s always been proven that
the best way to invest is to buy really high quality
companies when they’re trading at low prices, because
they are undiscovered or overlooked or they’re
being traded unfairly by investors or shareholders
are overreacting to some piece of news. That’s the way to invest, and
you just have to be patient, and you have to be smart. You gotta work hard and pay attention to things like stop loss limits. It’s a little, simple trick. Anybody can do it, and it
will completely protect you from the downside, which is
the most dangerous aspect of penny stock investing. It’s so quick that you could turn around, and 50% of your investment’s gone. That’s why you need to really
take this stuff serious. So between limiting your downside
when you make a call wrong and allowing for your upside
when you make a call right, you can be excessively
profitable by getting half of your trades correct. At the same time, you wanna
abide by position sizing. You don’t wanna be putting
most of your money all into one stock. You wanna break it down so
that you’re not diversifying, but you wanna maintain your
position sizing limits, so that if you’re trading
$10,000 in your portfolio and you buy one stock, maybe
the amount of money you put into that stock is $500 or
$1,000, that kind of thing. You don’t put most of your
money into any one stock, because anything could happen, even really high quality
companies that are doing great, they’re growing fast. A lot of times, they can decrease in price just because anything could happen. I hope I didn’t talk
your ears off too badly, and that your eyes
weren’t rolling too much. I really hope this helps. I do think you guys are awesome, and I am loving helping you guys out, and now that our team has
been expanding so quickly, we’re getting a lot more
time for me to do some of this YouTube stuff along
with all the analysis we do. I’m having a good team built,
lot of top quality people (mumbles) companies to bring them in, and, the next thing you know, we are going to be off
to the races, no problem, just like a stock. When a business does
well, we’re gonna do well, and I hope you guys stick
around for the whole time of it, because we’re just gonna
teach you how to make money from trading penny stocks.

Author Since: Mar 11, 2019

  1. Good information. I've purchased all of your materials. You definitely are different regarding on penny stocks. You make it easy to understand. Thank you so much. God Bless you…

  2. Peter, thank you so so much for these free lessons you give us… I really appreciate your teaching style, very easy to follow, you have a real knack for teaching this stuff!

  3. This tactic has already saved me hundreds of dollars. It's better to get stopped out and to be able to live to fight another day than losing 50-70- or even 100% of your initial investment. Personally, every single position I hold has a stop loss set, anywhere from -10% to -20% of the buy price depending on volatility and how much faith I have in that position. I set my stop losses lower than recommended, which I realize isn't for everyone, but, I'm willing to take a little more risk to allow for volatility movements. Sometimes, I will end the position early if I feel the company is doing bad news-wise or I have a bad feeling about it.

    I did get burnt on IDXG w/ stop losses though. Got stopped out and then, I swear to god, right after I got stopped out, it shot up almost 40%. Them's the breaks

     Kind of happy w/ myself as just the day before you sent out your last pick to subscribers this last Tuesday, after it dropped in price, I actually got in on the last pick before you sent it out 🙂 I must be somewhat on the right track as I felt pretty much the same way about that company and reading your reasons for picking it basically solidified my thoughts on it. Cheers Peter! Thanks for all of the incredibly helpful info!

  4. hi peter , after seeing your videos i have decided to join your team , pls guide me. i want to learn practically.

  5. Great video Peter. I am still learning through paper trading and this video really hit the spot. I have a question in regards to candlesticks. You may have done a video on this, but I can't recall. when you are looking at candlesticks in a trending market, what time frame should you look for a reversal or continuation signal? Hourly? Daily? Is it based on volatility?

  6. Thank you so much for your videos Peter!  They are (for me) the best videos to watch for getting started trading Penny Stocks.  My problem right now is that I don't have any way to watch your videos in some kind of order that makes sense.  On my screen I just see random Peter Leeds videos.  Then I end up re-seeing ones I've already seen but missing others.  Is there a good way to organize your videos so that I don't miss really important ones?

  7. hi peter ,thank you very much for your videos
    i wanna ask you wich online broker do you advice me for penny stocks and that accepts also foreign customers(i'm in italy)
    thank you very much 🙂

  8. That is also something that I'm starting to realize lately – "The most lucrative way to invest is just understand business!"

  9. Hey peter am gonna subscribe your newsletter my question whether u give us when to buy or sell the stock recommendation and how much amount u think is needed to invest as am new to stock i am learning things hav lost some money prior seeing your videos

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