So I’ve finally experienced what it’s like to trade penny stocks with real money this week just gone, and although it has been a losing one financially, it has been a very educational one with loads of valuable points and lessons gained.
I know I placed my first ever trade back in August, but I’m saying it like this as though I’ve started from scratch.
So my second trade with real money since my first one back in August cost me $304 which is not great, but it’s also not that bad, and it could have been a lot worse if I held on to the stock any longer!
Besides the money lost on that trade, I have tweaked my strategy some more as well as learnt what to wait for and when not to place a trade.
As well as this losing trade I made one other trade this week which unfortunately was also a losing one, but a small one at that, and best of all I cut my loss immediately this time which I finally got the hang of the third time round!
Alrighty then, lets show you what mish mosh I got up to this week!……
Here’s What happened this week
My first trade was what I’ve nick named the dumb ass trade, not because I lost $304, but because I made several careless mistakes and you can see the write up on it here.
Here’s the other trade that I made which is my third real trade:
So my third trade with real money only set me back $66 this time and this trade made me happy as I felt good about cutting my losses immediately!
$GBIM was moving rapidly and with good volume as well. I was surprised how it behaved, as the moment I placed my trade it soon went up to $6.13 and I was in the green and looking to exit at around the $6.30 area. For what ever reason it came hurtling back down within seconds and before I knew it, I was in the red and so I immediately put in my sell order as it was a no-brainer to cut my losses!
Of course it did shoot back up to $6.16 soon after my exit, but again it did not stay there for long so nothing improved really.
Why did I enter this $GBIM trade?
I spotted this stock when it was approaching the $5.90 area and was waiting to dip buy it as there was good price action on it with plenty of buyers.
As this stock is such a low float of only 5.13 million shares, I know that with volume the price will increase very rapidly indeed which is exactly what it did.
The other important factor as to why I traded this stock was that it’s last big resistance level was near the $7 area, so this had great potential to at least go to $6.50 or more.
As it turned out, I should have noted that it had already touched $6.30 with a rejected test pin bar moving into a reversal down trend which was also telling me that there was weak buying power here, So this was my first lesson learnt.
Secondly I should have waited for the green candle as my signal to dip buy, and not just entered because of a red candle with a long bottom wick.
Thirdly I should have noted that it had already dipped earlier quite substantially at the $5.40 area.
So Here’s What I learned From $GBIM
- Know where the resistance/support levels are
- Has it dipped already? Yes on this occasion
- Know your test pin bars as they are often key to resistance support levels
- Be patient and Wait for the GREEN CANDLE or support to dip buy
- Use 1 and 3 minute candle charts
- Cut losses immediately no matter what! I did this! 🙂
So all in all I am very happy with this trade as I feel I’ve learnt the most out of this trade than any other trade, as well as the paper trades that I’ve done.
Knowing your different candles is something that I have studied and continue to do so now, as candles also tell the story of where the price action is likely heading next.
Most importantly from the lessons learnt here, the other very important lesson is to be more patient and wait for decent trades. This could have been a good winning trade, but I am still learning and getting a better understanding of dip buying.
I also learnt this too!
Not too soon after I had exited my $GBIM trade I noticed that $BONT was on the move, and I have had my eye on this stock for the past two weeks or so as it is begging for the short squeeze to happen.
Proof that I was on top of this stock and ready to place my trade before it spiked with my comment in the Profitly chat room just below:
As I was more prepared for this stock and ready for it to spike with the anticipation of a short squeeze happening, all I had to do was enter my trade early.
So I put in all my details to buy 400 shares with my broker OptionsXpress, but just as I hit the place order button I get this following message appear on my screen!
When this message appeared I was confused as I know I had only placed 2 trades this week so far, so I was not breaking the PDT (Pattern Day Trader) rule, and I also had more than enough buying power to place this trade.
I did put the PDT rule sucks on my chart diagram above, but it is NOT the PDT rule that stopped me from being allowed to place a trade, it is that I had placed a trade on $GBIM earlier which took up most of my buying power.
Actually, when you have a cash account the PDT rule doesn’t apply which is interesting to know!
This is also NOT OptionsXpress fault, it is mine for not knowing the rules with the type of account that I have set up.
I will continue to use the account that I have got here, but I am now setting up a margin account with OptionsXpress as well so that I wont the buying power problem, but I will have to deal with the PDT rule which is ok in comparison!
Until I have grown my account to $25k+ everyone that day trades is effected by the PDT rule thanks to FINRA and the SEC authorities! Rules are rules!
I could have placed a trade for 200 shares if I knew what the reason was, but as I was scratching my head not knowing why I wasn’t allowed to place a trade, I went away and searched for answers instead.
After doing lots of research I discovered that I need to open a margin account so that I can place up to 4 trades maximum in 5 trading days if I have an account with less than $25k.
I opened a cash account as I thought I needed at least $10k minimum for a margin account, but it turns out that with OptionsXpress you only need $2k minimum which is cool.
You see, with a cash account what happens is you can only place a trade with the maximum amount of cash that you have available in that account, and once you reach that limit for that day, you have to wait the next day for it to clear, to be able to trade with the same amount of buying power!
So really really annoying that I learnt this lesson this way, as I could have made $300-$400 here, but alas I learnt something new instead! LOL
One other stock that I am following along with Tim and learning from right now is that of $LIVE. Here’s the chart of what I’ve missed, but also learnt from. It could still be tradable come Monday morning…
Wrapping this week up
So all in all on paper it’s been a red week, but a fantastic week I feel with what I’ve learnt, as I feel far more capable and confident with placing better trades as well as better equipped with knowing what to look for.
With a far better understanding of dip buying, I am even closer to getting this right! 🙂
One other main thing that I need to improve on is my set up with the various different screens in front of me on my one screen laptop! When I can afford to, I will invest in multiple monitors and more sophisticated gear to be more effective and efficient, but for now I am starting from scratch with a simple laptop.
Besides all the lessons learnt that I have gone through here, I am also taking smaller trades in order to gain confidence and momentum so that I can progress and start to grow my account.
So with only two trades made this week and both of them being red trades it’s no big deal, but with lots learned this week I am getting even closer to making my first green trade and lets see if I can make it happen 🙂
Until next time, don’t EVER give up enjoying what your fascinated about, and no I’m not talking about the birds and the bees! Find your passion and do it 🙂 Money is NOT the drive here, freedom is, as well as the fascination to want to become a very successful penny stock trader 🙂
~Don’t let set backs bring you down. Learn from them and continue with what you’ve learnt~