Happy New Year everyone and what a great start to the new year it has been 🙂
Today is Thursday the 7th January 2016. The entire market as a whole is down and looking very bearish, but penny stocks are absolutely kicking butt this week!
Trading anything on the stock market, whether it be blue chip stocks, futures, commodities, penny stocks or what ever, is no easy task as I’ve discovered, and that’s ok as I knew this before I chose my path to trade penny stocks.
Best of all I’m passionate about doing what I want to do and every lesson I learn is edging me even closer to success.
There are times of struggle and confusion, but through never giving up I will succeed at trading penny stocks.
Any ways enough of the drum roll, here’s what has happened this week so far:
New Tools and a Great Discovery
To start off with I still haven’t made any more trades since my last one of $GBIM back in early December of last year. I’ve been following the market every day and learning from Timothy Sykes every single day, with so many great lessons and ideas understood along the way.
While studying loads everywhere I can and staying up until 3am most mornings, I have been refining my set up of how to go about spotting penny stocks before they spike. So I’ve played around with a few different sites and finally started to figure out what works best for me.
I came across a site called barchart.com which is a very useful, but unfortunately it is not in real time with stock quotes and maybe it is in real time with the paid membership version. I will possibly check it out some time soon, but I’ve personally found that Investors Hub, My broker (OptionsXpress) yahoo finance and the Profitly chatroom are all perfect when used in the right way.
At first I was mostly using the Profitly chat room to choose the best stocks to trade, but I kept getting distracted with conflicting opinions as I was not being self sufficient or thinking for myself and I was also trying way to hard to share my trading thoughts as opposed to just getting on with it.
Don’t get me wrong, Profitly is AWESOME and I now use it for ideas when there’s not much going on in the market, when I’ve got a question for Tim and also to share thoughts as well as learn from others.
Here’s How I Go About Finding Penny Stocks To Trade:
Before you choose any stock to trade you need to know what to look for as not all penny stocks have the same credentials to one another. I’m not going to go over the basics here as it is pretty simple stuff, but all I will say is that “Supply and Demand” are two of the most important factors to pick!
If you want to learn and know how to chose the best penny stocks and do it properly then do what I did and check out Tim’s free penny stock guide Here, or invest in your education like I’ve done and buy his two best dvd’s which are How To Make Millions dvd and Spikeability.
You’ll be amazed at what you don’t know about penny stocks and the stock market in general… I was when I first started!
Any hows, with the watch list that I have accumulated over a few months and with others that I add along the way, I first of all keep an eye on any meaningful news, but more importantly I watch out for any volume increase first.
Once the market opens at 09:30hrs or 14:30hrs UK time 🙂 I then watch out for the top percentage gainers with volume increasing.
The stocks with the most volume increase before market open often have the biggest reaction with volatility, but not always.
Any stocks that are moving before market open are the ones that I keep my eye on, and knowing there past performance and spikeability of these stocks by analysing charts beofore hand does give you a better idea of how far they can potentially go or not!
Trading penny stocks and the stock market in general is an art and not a scientific equation that gives you the exact same answer every time.
Some times stocks react and some times they don’t, but all that matters is that you get in and out at the right time with the stocks that do spike.
I will get on to my great discovery in a moment, but I also want to share why I am going to use level 2 not as much now as a test. Everything I do is still in test mode to be honest, as I am still refining my trading strategy and everything that I learn from Tim and others.
Why I May Stop Using Level 2
Back in the day before computers were available, all the big professional traders used Thomas Edison’s ticker tape machine to get the best information available of how many shares were being traded and at what price.
The ticker tape machine was cutting edge in it’s time, and the lesser off general public did not have access to one of these as they mostly could not afford one. Now moving forward to that of the 21st century we have sophisticated technology and computers that pretty much tell us exactly what to do, to those of us that learn how to use these gadgets to their absolute best.
This is what the old Level 2 software use to look like! (Thomas Edison’s Ticker machine)
As great as it is to be able to see how many shares are being bought or sold and how much supply and demand there is at any one given time during trading hours, what I discovered is that: a) it all happens ridiculously fast and b) there is far too much manipulation that goes on which in turn gives you a false reeding as to what the stock is actually doing.
It is actually quite useful to know what certain stock order routing servers are as some of them will give you an idea as to whether there are serious buyers or sellers in the market for the stock that you are looking at. I haven’t researched or looked into enough detail to give a detailed description of the important order routers, but I may look into this in greater depth if I decide to continue using level 2.
At first I thought it was just me that was finding it difficult to read the level 2 screen as big orders constantly pop up and disappear without getting executed. Interestingly enough from reading Jesse Livermore’s book, he too found it confusing and misleading at times back in the early 1900’s and he was one of the most famous traders of all time.
Jesse Livermore’s book “Boy Plunger” is a very important and poignant read with a very sad story behind it all, but by reading his book it enlightened me and made me realise one thing for certain; money is NOT the root of all evil, Greed is!
Anyways here’s what level 2 software looks like today:
It was actually thanks to Mathew Owens (Triforce Trader) through an Answer Stock episode on Profitly, that he mentioned he doesn’t use level 2 software to trade, as he finds there is too much manipulation and misleading information given to you. For those of you that don’t know Mathew Owens, he turned $100k into $1 Million and continues to grow his profits all without using level 2!
So if Mathew Owens doesn’t need it then neither do I, and I’m going to NOT focus on using level 2 software for a bit and see what happens!
Well without further ado, the next tool that I am going to share with you has also been inspired from Triforce Trader and no I’m not a subscriber of his yet, but I will be once I’ve grasped trading penny stocks first.
Here’s The 2 Golden Tools That I’ve Discovered!
The 2 tools that I have been testing out and getting to grips with are:……Drummmmmmmm Roll!
- The Ichimoku Cloud
- The Keltner Channel
I did mention using the Ichimoku cloud in a previous post, but it’s taken me some time to understand it and put it to it’s proper use, and I am still back testing it by seeing what results it gives out by comparing it with different stocks breaking out. By chance I also stumbled across the Keltner channel which is similar to Bollinger Bands, but far more accurate for short term breakouts.
By combining Ichimoku and Keltner together along with the understanding of important candle patterns, the results so far are incredibly accurate. I do also use the Relative Strength Indicator as a reference, but that is all it is there for.
The 2 Main Problems I’ve Been Having
My first main problem was figuring out the best set up for stock picks that works for me, which I believe I am happy with now as I am much quicker and more efficient at choosing the right stocks before they spike big. I am also becoming self sufficient at picking stocks before they spike too 🙂
The second main problem I’ve been having is knowing when to get in a trade and when to get out of a trade for maximum profit, as explained above level 2 software was not helping me at all!
The whole concept of what I am constantly doing is to tweak and fine tune my strategy and discover what works best for me. I’m not trying to reinvent the wheel, all I’m doing is learning from the best and seeing what works by testing out tools that have been around for some time now.
I won’t go into detail of how I use these two tools together just yet as that is for another post, and I am still testing it out at the moment. I will show a sneaky peak though of what these two tools together look like.
It all looks like some kind of graffiti art that you would see in the Tate modern Gallery in London or a map of the London underground tube station, but these lines tell me best places to enter and exit my trades.
The upper smoke cloud is the Keltner Channel and the lower cloud is the Ichimoku.
What’s exciting is that I have tested these 2 tools on past history of stocks with morning spikes, and every time the results are pretty much the same. Even by checking out the only three trades that I have made so far, if I had discovered this earlier I would never have entered my trades where I did!
Alas this is the beauty of learning anything new, mistakes and failures are inevitable, but that’s what is so great because if it was easy then we would all do it, and there would be no euphoria or satisfying moments of success when we do succeed!
~The Definition of Insanity is doing the same thing over and over again while expecting a different result!~
If I’m not willing to learn from my mistakes or understand how to trade penny stocks successfully without fine tuning what works best for me, then this would all be a waist of time!
So while the overall market this year so far is in the red, penny stocks have been spiking all week.
The top penny stock spikes this week have been: $COOL, $LEI, $GSI, $EARS, $EMAN, $INVT, as well as others.
It’s interesting to know that no matter what the overall market is doing, money can be made on the stock market as long it’s open to trade!
On that final note I am going to go to bed as it is 03:19hrs in the morning here in Great Britain!
Lets see if what I’ve discovered works by entering a trade when the opportunity arises. I could be completely wrong here and it might just be a fluke that these tools work, but there’s only one way to find out and that’s to put it to the test 🙂