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Your penny stock trading mindset may seem like it’s something that should be “strictly by the numbers,” right? . Can you handle it if a big loss wipes out a major chunk of your portfolio? How about if a stock you were sure was going to go up heads in the opposite direction? Can you get your ego out of the picture quickly enough to cut your losses?
Your mindset actually plays a pretty big role in your ability to trade successfully, so it’s something worth addressing well before you ever make your first trade. Ask yourself the following questions to see whether or not your mind is in the right place for trading penny stocks:
AM I DISCIPLINED ENOUGH TO STICK TO MY TRADING RULES?
I’m going to let you in on a little secret… One of the biggest mistakes I see amateur traders—even some of those in my millionaire trader challenge—make is to trade for the hell of it. It sounds crazy, but people trade for all sorts of reasons. Maybe they have a good feeling about the company, or maybe they got a “hot tip” off an email newsletter telling them that XYZ Company is going to be the next IBM.
( Spoiler alert —we’ll cover this more later on in this guide, but if you’re getting your stock tips off a public mailer, there’s a good chance they aren’t really “hot” anymore! )
Maybe these traders are just so anxious to make any kind of play that they force trades, even when the technicals just aren’t there. Who knows? People trade for all kinds of reasons and most of them aren’t logical. That’s why so many people lose money in the stock market and then have the nerve to say that it’s risky. Well here’s the thing, it’s not risky if you stick to a set of trading rules.
I have a set of standards that I abide by—if a potential trade doesn’t meet them, I don’t play. I’ll share some of them with you later on, but for now, what you need to know is that there’s a structure to what I’m doing—a method to my madness: or a penny stock trading mindset .
Am I always 100% perfect at following my rules? Of course not. I’m only human—I get emotionally tied up in trades from time to time, just like you will. But that’s the exception for me, rather than the rule.
When it comes down to it, it’s a question of mental discipline. Are you strong enough to walk away when a trade doesn’t go as planned? Can you keep yourself from jumping on a “hot” stock’s bandwagon, despite its promises of vast riches? If you aren’t confident in your ability to stick to your trading rules, work on building up your discipline before jumping into pennystocking.