Take the Time To Watch and Learn
Dear Penny Stock Millionaire,
Penny stocks offer an opportunity to gain financial freedom unlike any other. But too many people expect to get rich quick. For many of you, the best thing you can do right now is watch and learn.
And THAT means you have to be willing to take a step back. Whether it’s how you build your watchlist or which setups you choose, too many of you are NOT being meticulous.
That’s exactly why I trade like a retired trader. Even then, I lose roughly 25% of the time. And last week I had a day where I lost on every trade I took.
That doesn’t happen often, but when it does, I do exactly as I’m suggesting you do…
Take a step back. Trade smaller position sizes or don’t trade at all. (Cash is a position.) Be willing to watch … and learn.
Keep reading for more about the power of watching and learning.
Karmagawa Donates to the Houston Food Bank
I’m proud to donate 100% of my trading profits to charity. A couple of years ago, I donated $25,000 to the Houston Food Bank. I’m on my way there in a few days to donate another $100,000.
As I previously announced, that includes my October trading profits of roughly $94,600.* I plan to top it up with my own money to total $100,000.
So far this year, my trading profits are over $954,000* — all going to charity. I’m in the process of figuring out more donations to make. It can take a while to decide which charities to support. Which is why I spend so much time talking with charities around the world.
(Note that these results aren’t typical. My students and I put in the time and dedication and have exceptional skills and knowledge. Most traders lose money. Always remember trading is risky … never risk more than you can afford.)
Let’s get to trading with the…
Trade of the Week
Aside from this being my biggest win in dollar terms, it highlights a pattern you can use to build a small account.
When I show my trades, some people say, “Tim, you’re trading in and out all day. I’m under the PDT rule … I can’t do that.”
First, I show tons of potential trades and you have to choose what works best for you and your schedule. But, more importantly, anyone could have done this trade. It didn’t use a day trade and it worked.
Check it out…
Medical Marijuana, Inc. (OTCPK: MJNA)
I bought MJNA spiking into the close for a few reasons. First, I like breakouts over breakouts. Second, it fit the first green day pattern to a T. Plus, it was a former runner in a formerly hot sector.
Here’s the MJNA 5-year chart…
MJNA chart: 5-year, daily candle, former runner — courtesy of StocksToTrade.com
As you can see, MJNA is a former runner. Not in the past 100 or even 200 days. But back in October 2016, the stock quadrupled in a few days. Now here we are. It’s much lower priced, but former runners can run again. That’s what you have to understand.
Here’s the MJNA chart showing my trade…
MJNA chart: November 6–9 intraday, first green day — courtesy of StocksToTrade.com
Again, this is a pattern I think anyone can trade. I don’t know how many Fridays over the past 20 years I’ve held a stock long over the weekend. But it must be dozens, at least.
So, I bought a big percent winner that was closing strong in a hot sector. AND, ideally, it was a former hot stock in a former hot sector. It’s the same pattern I’ve played many times before. It failed the next day, but it gapped up nicely.
It was disappointing that it turned out to be only a one-day runner. But I made $2,045 on a 15.74% win, sticking to one of the same patterns I’ve been trading for 20+ years.*
Now it’s time for…
Trading Mentor: Questions From Students
This week’s questions come straight from my most recent Trading Challenge webinar. Every week, Challenge students get two to four live webinars presented by different mentors…
For example, Tim Lento does a weekly trade recap webinar every Tuesday. He breaks down trades from the likes of Jack Kellogg, Mike Huddie, and Kyle Williams. He shows charts, entry/exit points, and discusses their ideas. IMPORTANT: He doesn’t just pick winning trades. He shows losing trades, too. It’s invaluable for new traders to see, and Tim Lento is a master at explaining in detail.
Mark Croock also does webinars on Thursdays during the afternoon power hour. He explains what trades he’s in, what he’s looking for, and the types of plays available in the market. Again, Mark’s webinars are jam-packed with information and ideas.
I alternate live-trading and Q&A webinars. This week’s questions come directly from a Q&A webinar.
First, from student jdmass…
“Your personal watchlist seems to have 20–30 stocks. At market open, are you watching the price action on your physical watchlist to determine when they are dipping/spiking? […] Are you trying to watch multiple charts simultaneously?”
It’s not always just about the stocks that I’m watching for potential trades. Sometimes, I want to learn about the market or a specific sector.
For example, I watch Tesla (NASDAQ: TSLA) as a guide for all electric vehicle stocks. I’m not planning to trade Tesla, but if it starts to move in a big way, I’ll look for sympathy plays.
I also watch the Nasdaq to see what tech stocks do. Or a few bankruptcy stocks just to get a sense of how bankruptcy stocks are trading.
And then sometimes it’s a matter of watch and learn. This is an important lesson. Cash is a position, and you don’t need to be in a trade at all times. But you can learn from watching different stocks. So don’t feel like you have to be in a trade.
The next question is from student jthtrade…
“I’ve watched as much as I can find on your dip-buying strategy, but could you specify whether you set an exact risk number on a good setup?”
No. There’s nothing exact about trading. Welcome to the stock market. I don’t have an exact risk, exact reward, or exact process.
Anything can change.
Forget the word exact. Get it out of your vocabulary. If I could go inside your brain I would fine-tune it. I would make it impossible for you to ever use that word when it comes to trading.
I always say to focus on the process. And I say the patterns are the same over and over again. And I tell you to study history because that’s how to prepare for the future.
THAT should make it very clear to you that trading is NOT an exact science. You might have to see a pattern play out a hundred times before you get a feel for it.
Even then, you’ll lose sometimes. So whatever happens, always follow rule #1 and cut losses quickly. Watch the video below to understand why it’s so important to not only cut losses but learn from them.
Lessons From My Recent Losses
Losses are never fun, and I’m not proud of them. But I’m always willing to show them.
Back to our focus this week…
Trading Psychology: Know When to Watch and Learn
Sometimes, the best trade is no trade. But that doesn’t mean you can’t learn from what’s happening in the market. Most of my top students have spent a lot of time studying or just watching the markets. Especially on slow days…
Even top student Jack Kellogg STILL uses slower days to learn…
When he didn’t see anything worth trading after the open last Thursday, Jack stepped away…
10:02 AM Jackaroo: “nothing for me today, later guys. only about +$1k between yesterday and today + all OTCs lots of weakness, not a day for me to try to find something when nothing is there.”
I don’t know if Jack took a walk, or what. But when he came back a couple of hours later he got this…
12:18 PM bsalm → Jackaroo: “you not out for the day…”
Jack’s answer explains why he’s so successful. And why I so look forward to seeing what he does in the next few years…
12:18 PM Jackaroo → bsalm: “not trading, but always taking notes.”
So Jack Kellogg, a millionaire trader, had the wisdom to watch and learn.* Not trading, but always taking notes. I wish more students had the same mindset. Jack did come out of retirement later in the day, but he wasn’t in a hurry. He didn’t feel the need.
Don’t just chase anything in this market. We’re seeing a lot of big moves but then a lot of big cracks. The name of the game is small gains and small losses. Keep your losses smaller than your gains. And if things aren’t working, step back, watch, and learn.
Are you willing to take the time to watch and learn to speed up your journey?
Talk to you tomorrow,
Editor, Penny Stock Millionaires