Sometimes, it feels like I’m stuck on repeat…
But I’m still seeing traders make the same mistakes time and time again.
Over the last decade, I’ve taught thousands of students how to trade penny stocks…
And I continue to remind them of the most common mistakes that traders tend to make.
As a teacher and a mentor, my ultimate goal is for each and everyone one of you to excel as traders.
I don’t want you to fall into the trap of making repetitive mistakes.
Just the other day I saw a trader that made a mistake that make me cringe…
And that’s why I feel the urge to share with you the five most common mistakes traders have been making lately…
And what you can do to avoid them.
Table of Contents
1. Don’t Chase The Hype
One of the biggest mistakes traders make is falling victim to the hype and unrealistic expectations of penny stocks.
This industry is flooded with promoters trying to pump up stocks for newbies to buy in an attempt to send it soaring higher as they rake in their profits…
Or you’ll see short sellers working together to try and short a stock to zero, which could send it Supernova.
Just because they are fooling the majority of traders with their evil ways, that doesn’t mean you can’t profit from it…
Every time you see a stock spiking, you need to understand the reasoning behind it.
It could be from promoters…
It could be getting short squeezed…
Maybe it’s a Breaking News Play…
Whatever the reason is, at the end of the day, these penny stocks are still garbage…
And who knows how long their run could last, it may be minutes or it could be days…
But eventually, they will fail…
And I’m not one to instantly buy when I see a stock spike if there isn’t any news behind it.
Here’s just one example.
ShiftPixy, Inc. (NASDAQ: PIXY)
Source: StocksToTrade
This stock spiked during pre-market, but if you decided to buy it as soon as the market opened and didn’t lock in your profits…
Just a few minutes later you saw the stock drop below its opening price.
A lot of traders didn’t lock in profits here, and they are wishing they did…
That’s why I don’t stay in my trades long and look to lock in any profits along the way…
But also a good example of why I don’t instantly buy a spiking stock in the morning without any news.
The more you study how penny stocks work, you’ll learn not to chase the hype of it spiking early in the morning…
Don’t chase them…
And be better prepared to spot a better opportunity to capitalize down the road.
2. Doing Research
For traders with small accounts, it’s crucial to be meticulous with your trades.
I’m not just looking to buy random stocks, I’m looking for some of the biggest percent gainers for that day or week to help set myself up for success.
Analyzing charts, focusing on Breaking News Plays…
And just simply studying previous trades to help you better understand the process.
Not every trade is going to be perfect, sometimes you’ll be early and other times it just may not work out as you planned…
More Breaking News
- Palladyne AI Corp: Can Recent Drones Market Expansion Propel Growth?
- Microvast Holdings (MVST): Growth or Bubble? Delving Into Its Recent Stock Surge
- ChargePoint Holdings Inc. Seizes Market Momentum: Is Electric Growth Sustainable?
But at the end of the day, reviewing and understanding how these stocks work is going to better prepare you as you continue on your journey.
3. Managing Risk
Successful trading hinges on effective risk management. If you are holding onto a stock that dropped from when you initially bought it hoping it could bounce, you may be in store for a rude awakening.
One of the most effective ways to manage your risk is knowing how much you should risk…
But also know when to cut your losses.
I always have a goal set in mind before every trade.
Here’s an example of a trade yesterday where I managed my risk by cutting my losses quickly…
Let’s take a look at the chart…
Source: StocksToTrade
If I held onto this stock any longer, I would be looking at a bigger loss, instead, I protected myself by cutting losses quickly and went on to look to see what other opportunities were out there.
I even made sure to remind my students in chat.
So as you continue to trade, don’t be afraid to cut your losses quickly if your trade doesn’t go as planned…
Even though it stinks to lose money, it’s better than completely blowing up your account.
4. Be Patient
Trading penny stocks requires you to be patient and disciplined. If you struggle to be patient or feel the need to trade 5-10 stocks a day, that’s not being meticulous with your trades.
For all of 2023, I’ve only made 212 trades…
As that may seem like a lot, but that’s only roughly 1.8 trades per day!
You don’t need to trade a lot to make a lot, you need to be patient and let the best opportunities come to you.
Don’t just instantly jump on the first big percent gainer that you see…
Be sure to ask yourself…
Where could I potentially dip buy this?
Or is this stock on the verge of breaking out?
5. Gaining Experience
Most traders who get into trading don’t want to spend the time to get more familiar with the process…
They’re all about making money as quickly as possible.
Over the last 20+ years, I’ve learned a lot about the market that has helped shape me into the trader I am today…
And I share all of my thoughts and ideas with all of my students daily.
Let’s face it, I don’t like making mistakes, no one does, but none of us are perfect…
And everyone here today will eventually make a mistake while trading, that’s why it’s important to remember to cut your losses quickly.
Don’t let those mistakes set you back and wipe out your yearly gains. I’ve done that before and it’s tough to climb out of that hole.
Continue to practice one strategy that aligns with your risk management and overall goals.
And keep surrounding yourself with other traders to discuss ideas and be sure to see what my thoughts are every day.
I’ll see you in chat.
-Tim
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