Unfortunately one of my picks of the year this year was Great Western Minerals Group hasn’t been performing. I still am planning on holding on to this company for the longer term, but it’s unfortunate that it hasn’t been a big winner.

The lesson from above is that you need to have an exit point for both taking profits and cutting losses on all of your positions. Several penny stocks I’ve invested in were clearly trades from the outset and specific targets and those are close to being met. GWG.V is one that I’ve always been interested in holding for a longer term, so I’ve widened the profit/loss gap on this one.

Technorati Tags: canadian penny stocks, cutting losses, taking profits, trading rules

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By investing capital in small companies you are helping companies with real people make a real living. You are participating in the free market that we are very fortunate to be able to be involved in. By taking some time to really learn about the companies you choose to invest in, you will know that they are making steps towards success.

Not all companies in the sub $5.00 stock price range will be able to become large corporations nor do all of them desire to. It’s OK there are still lots of stocks that will allow you to make oodles of profit under the $5 stock price range.

Be prepared for losses while investing in penny stocks. It’s true that there will be losses, but it’s important to have you’re plan in place and research done. If you truly do your homework on a stock you will come to realized whether or not a stock is a scam or really worthwhile. The people out to scam you are mostly people that are hoping that you buy without due diligence. It works for them in spades too. Don’t let yourself be a part of that.

So to answer the question. YES you really can make money with penny stocks. They are clearly a high-risk way to invest money, but for those who have the time to perform some stock market research it does have the potential to return real money.

Happy Trading

Technorati Tags: canadian penny stocks, penny stocks, small cap

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A Recommended Read
Having had the chance to read a few books over the vacation so far, I’ve got one to recommend. It’s called Rework and it’s by the guys at 37signals. This book is by no means an investing book but it is still relevant to anyone who reads this blog. Why you ask? It gets back to the basics of entrepreneurship which is really the spirit that drives independent investors.

Meetings are toxic
One of my favorite sections of the book was about meetings and put simply: meetings are toxic. So you should be avoiding them at all costs. Next time you’re in a meeting, look at the people around you, add up what their collective hourly wage would be and see how much money is being spent on the meeting. Staggering really.

Back To Investing
Although there’s nothing specifally mentioned about investing. Penny stock investors are looking at small companies. This books focuses on people operating in small businesses. It really might be worth considering some of the subjects covered in this book then look at the management of the company you’re thinking of investing in. If you see that management is looking to actually contribute to the success of the company, not just his bottom line then you might just have yourself a winner.

Should You Read It?
Absolutely. The book should really serve as a discussion point for why you do what you do at any workplace, not just if you own your own company or are investing in an up and coming company. Get out there and check it out.

Technorati Tags: book review, review, rework

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Well Happy Valentines Day to all of you penny stock investors out there. Hopefully this is another day where you’re able to spend time with your loved ones and share with them your time and kind words. So after you’ve done that I’ve just a got a quick little message about investing in penny stocks, and advice that applies to all investing as well.

It seems that when you hear about general investing advice a lot of it has to be amplified when you’re dealing with penny stocks. This is very true for many reasons, but mostly it’s because of the additional risk that you’re taking on. Investing in penny stocks is a high-risk endeavour, but chances are if you’re hear reading this you already know this and have accepted that fact. With that extra risk you’re hoping to profit big time and that’s cool. But there’s something that you should keep in mind once you find that gem of a stock that’s up 400% in your portfolio. Don’t fall in love.

Falling in love with a stock is one of the worst things you can do with an investment because it won’t love you back. It can’t, it’s just a piece of paper at best, and a few pixels on a screen at worst. But seeing that balance on your investment account grow day after day as your company is crushing it can distract you from the task at hand which is finding solid investments.

One of the Top 10 Rules for Investing in Penny Stocks is to have an exit plan and you need to have one for your winners as well as your losers. I sincerely hope you’re not in love with your losers, but you might love your winners and that’s just as bad. Your winners can turn into losers overnight. Again, this is more true with penny stocks than any other class of investments. Since a lot of these are upstart companies they can have wildly good news for a couple of months before lack of financing or lack of approvals kill the dream and the company goes down the tubes and is ultimately worthless. If you’re in love with that stock you’ll keep giving it a second, third and fourth chance, all the while your account balance is on the slippery slope down and your exit strategy along with it.

So on this Valentines Day fall in love with a person, not a stock.

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#image credit: Niffty..

Technorati Tags: Investing, penny stocks, trading stocks

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10. Research The Management. Probably more important than the earnings of penny stocks companies since many of them will be burning money (operating in a loss) until they go into production, or otherwise are in a highly leverage growth strategy.  Their balance sheet, and cash flow statements may not look as good as some of the large cap stocks, but they have value to offer through sound management with experience who can lead them to the next level.

9. Research The Cycle. Many stocks have periods of large price appreciation and decline.  If you can spot the cycle trade it and profit.

8. Don’t Invest What You Can’t Afford To Lose. Penny Stocks are exceptionally risky.  If you don’t mind looking a statement that turns to $0 then maybe it’s not the best market for you to be in.  But the rewards are exceptional for the brave and knowledgeable.

7. Know Your Exit Strategy Before You Enter. Whether you expect a stock to double in price, sell out to a competitor, or start paying you a dividend know why you’re buying the stock and recognize the time when you’ve reached your goal and exit the position.  Also, know when you plan to cut your losses before you enter the position.  This is usually a more difficult mental commitment to make.

6. Don’t Fear Cash. If there aren’t any stocks that appeal to you after doing the research hold cash.  It’s better than investing in a mediocre company that doesn’t interest you.  You’ll save heartache and also have the cash on hand to invest when your ideal investment comes along.

5. Watch The Hype Machine. There are many penny stock newsletters out there that are pimping stocks for moves higher based mostly on their promotion campaign.  Sometimes it’s valid, but sometimes the companies are barely a legal entity.  So feel free to invest in these stocks but don’t trust anything you read on them.  Do all the work yourself to see if the hype matches up to the reality, and be very careful of gap opens and rapid sell offs.  Tread lightly or not at all.

4. Be Volume Conscious. Be conscious of the number of shares trading hands everyday.  This can drastically affect whether or not you can actually buy or sell shares.  Having a large volume will help you enter and exit your positions more easily.  Look for average volumes over multiple days, as a single day of heavy trading could be the result of a large buyer/seller.

3. The Big “D” And I Don’t Mean Dallas. Diversification.  Pretty simple concept that anyone reading this should already be aware of.  Don’t put all of your money into one stock.

2. If You Chase A Bull You Might Get Trampled. If a price has exceeded where you wanted to enter, don’t chase it up.  Read the post for more details.

1. Place Limit Orders. Don’t get killed by bid/ask price spread. If volumes aren’t large enough sometimes the spread between the bid price and ask price can be quite large.  If this is the case it will eat in to your profit by the difference in the spread if buying the ask and selling to the bid.  Be sure to place the limit orders to avoid getting killed on the spread.

Technorati Tags: Investing, investing rules, penny stock, top 10 rules, Trading, trading school

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Trading with these emotions in play, is akin to driving in a storm without windshield wipers. We can’t see the road clearly, and accidents are very likely to happen!

Here’s the good news. Learning to clear your emotions is easy, and pleasurable. You’ll feel such relief that you’ll wonder why you didn’t do it long ago. Your trading will be affected in dramatic ways, as you let go of the destructive results of trading while blinded. Not only that, but once transformed into positive feelings, you can use these new emotions to inspire you and find new enthusiasm for improving your trading skills.

In this post, I’m going to tell you about two easy to learn techniques that get fantastic results!

As Dr Brett Steenbarger reminds traders regularly, emotions aren’t bad. Some of the best traders are very emotional. They use that energy to drive their performance and to continually improve. The fact is that we can’t get rid of emotions even if we want to. Unless you are a Vulcan, you are going to have emotions! The key is learning how to work with them, and transform them so that they are a positive force.

While many of us have learned or are learning the technical skills of trading, the area of emotional management is something that many traders overlook in their eduction. Its sad really that we’re not taught how to work with our emotions as kids. Most of us learnt quite the opposite, how to escape or push down our emotions through television, food, exercise, drugs or in other ways. And now after many years of practice we are all expert at avoiding the pain of difficult emotions. But avoiding doesn’t help. The emotions are still there stored as stress in our body, and waiting in our subconscious for the right trigger to come out again. Its time for a change.

Before you get gung ho with the emotional clearing, first here’s a really important point. Our emotions are trying to tell us something. Its critical that we don’t avoid or even transform our emotions without first finding out what they are trying to tell us. All the positive thinking and feeling in the world will not help you if you don’t have a trading edge. Take a look at 10 Ways to Deconstruct Your Trading and Build a Better Plan and 10 More Ways to Deconstruct Your Trading and Build a Better Plan if you need help with that.

Now let’s take a look at emotional clearing.

In general I’ve found that there are two types of clearing that I need to do. One type is quick, short term clearing of emotions while I’m trading. And the other type is clearing out older, longer term emotions that may be affecting my perspective, or causing a slump etc.

I use two different techniques, one called the Sedona Method which I use for short term clearing. Its quick, effective and easy to use even while you are trading. And if you want to start by learning just one technique, you can also use this for longer term clearing as well.

There’s nothing scary involved. No voodoo, brainwashing or electrodes! You simply ask yourself a series of questions which causes a release of emotion. In fact, the Sedona Method is so simple, that on first sight you may wonder how something so basic can work so well. I don’t know why, but I do know that it works amazingly, and that it has been validated and proven to work in studies by the Harvard Medical School.

To do the technique in its simplest form, you first learn to just let the emotion be there, without fighting it, without running away from it. Then you ask yourself three questions. “Could I let it go?”, “Would I?”, “When?”. Once you have learned the subtleties of the technique, its that easy.

Now imagine that you are trading. You place a trade, and get stopped out at a loss. That loss brings up strong emotions for you, which clouds your perspective. You are so caught up in feeling bad about your losing trade that you miss the next opportunity just a few minutes later, a trade which would have been very profitable.

Rewind: Imagine that you are trading. You place a trade, and get stopped out at a loss. That loss brings up strong emotions for you. You quickly run through the Sedona Method and clear the emotion. Your perspective is clear and you immediately see the next opportunity and are able to respond to it. Your emotional clearing skill has supported a profitable trade.

In this situation, I would also follow up at the end of the day by doing a deeper clearing to clear whatever it is that is causing the extreme reaction to losing. For this I’d use a technique called Core Transformation. It also involves a simple and easy to learn series of questions that you ask yourself in order to communicate with the part of you that is feeling the intense emotion. You learn to identify what that part wants for you, and then continue to guide it through simple questionning to its core state – very positive energy.

Like every trader I’ve had hundreds, probably thousands of experiences of feeling strong emotions before, during or after a trade which I’ve been able to quickly transform into a calm, positive, opportunistic state in which I can see the market much more clearly. By using these two clearing techniques I’ve found that I’m much better prepared to execute each trade as a unique opportunity, and to maintain a positive approach to developing as a trader.

I hope you find this beneficial and get as much pleasure from emotional clearing as I do. It feels great to be clear!

If you’d like to learn the Sedona Method properly, I recommend starting with the Sedona Method book. You can also read FAQ’s here. If you are interested in finding out more about Core Transformation you can read the book Core Transformation or learn the method in detail through the DVD of the training course.

All the best!

Mo

TradingAdviceBlog.com

This article appears courtesy of Traders Blog, the Internet’s most popular blog site for traders.

For four complimentary trading videos, visit:

Technorati Tags: emotional trading, Trading, trading school, trading strategies

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So here are three ways to use stops to protect your capital and lock in profits from a trade. These three money management techniques can be used in stock, futures and forex trading.

The important rule is that you do use a real stop in the marketplace. A friend of mine joked with me that that he had never seen a “mental stop” filled electronically  or in the pits.

If the market is good your stop will not be hit. If the market is bad or changing direction then you’ll want to be out of it anyway. That is why stops are so crucial to trading success.

Here are the three most commonly used types of stops. Which one do you use?

(1) Dollar stop.
(2) Percentage stop.
(3) Chart stop.

If you chose (1) you’d be correct, but, you would also be correct if you had chosen 2 or 3. All three are money management stops and are used to either lock in profits or protect capital.

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1) A dollar stop, is when you set a predetermined dollar amount to a trade. Let’s say you want to risk $500 on a grain trade or $750 on a stock trade. Once you get your fill back from your broker or electronically online you simply figure from your fill price where to put your stop.

Pros: Easy to implement and use.
Cons: Can place stops too close in a volatile market

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2) Percentage stop, is a very simple way for you to place a stop on a position. Here’s how it works. Let’s say your trading account is 100,000 dollars and let’s say you only want to risk 1% of your total portfolio on any one trade. You simply take a $1,000 risk which represents 1% of your over all portfolio. This can help enormously in avoiding taking BIG LOSSES. A 1% loss is easy to absorb. A 30% or 40% loss in a trade is an account killer, and should be avoided at all costs.

Pros: Easy to implement and use.
Cons: Can place stops too close.

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3) Chart stop, a chart stop is where you place a stop that is either above or below a crucial chart level. The good thing about a chart stop is that this level is often used by other traders. That can both be a good thing and a bad thing, here’s why. Using either one of our first two examples only you know where the stop is. With a chart stop, a great many traders/brokers know that is where the stops are. In an illiquid market this type of stop should not be used, as many times brokers gun for the stops. In a highly liquid and active market this is a good stop to use.

Pros: Very easy to implement and use.
Cons: Can’t be used in thinly traded markets.

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So there you have it. Now you have all three ways to manage your money and protect your profits in the future.

Use stops…let them work for you.

Adam Hewison

President, INO.com

Co-creator of MarketClub.com

This article appears courtesy of Traders Blog, the Internet’s most popular blog site for traders.

For four complimentary trading videos, visit:

Technorati Tags: Investing, money management, Risk Management, stop losses, trading school, trading strategy

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There will be posts about risk management, and how it applies to penny stocks, in a future post.  If you’d like to hear about it, please subscribe to the RSS feed using the RSS button above.  In the mean time browse the site.  Read up on a few companies I’ve mentioned or check out Chris Perruna’s site, he’s the author of the Portfolio Spreadsheet I just mentioned here.

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Technorati Tags: canadian penny stocks, education, portfolio, risk, stocks, tracking

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