Bag Holders Anonymous….did you hold that penny stock too long?

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Ugggghhh…Is this how you feel after realizing your one of the bag holders in a penny stock  you bought? Losing money is never fun. It happens to all of us, but mostly to new penny stock traders.  While you can make a ton of money playing penny stocks, you probably believed the hype and decided to hold too long .  Fact is, there's a real good chance that at some point you had a chance to make a profit.   Whether it was only 10% or so,  it was there, come on admit it.  Most likely the vision of $$$ in your eyes had you hoping that ten cent stock was heading to a buck.    On other exchanges, 10% would be a lot, but its not that exciting in the penny stock world after seeing over 100% gains happen consistently.  But gain a 10% return on your money on a daily basis, and that adds up fast.  (For anyone reading this new to the penny stock world, yes you read that correctly, at least 10% a day when approached properly.  It happens everyday.  The problem is, you can easily lose that much and more, extremely high risk and high reward.)

Now that your a bag holder, are you looking for someone to blame?  Most noobs do.  Guess what, you made the decision to press the button.  You forgot the extremely high risk part of it. So your going to have to look in the mirror.   But you can learn from this, the faster the better.  See, the difference between experienced veterans and newbies in the penny stock market is, noobs don't understand how the penny stock market works.

The dream of catching the next OTCBB to NASDAQ stock is what attracts most people in the first place, then they get a very rude awakening.   Many leave to never come back, but others learn quick.   And those are the guys that have been around the penny stock market for many years churning big profit.

So how can you learn to survive and profit in the penny stock market?  For one, start by understanding what the penny stock market is.  Its an extremely risky place to put your money.  It's a place full of dreams.   Dreams, because of the 3000+ micro cap companies trading on these lower tiers, about a handful will actually up-list to a higher exchange.  As for the rest, dreams are just about all they have at this point.  These companies are start ups, they need to raise capital to survive until their product, service or idea starts bringing cash flow.  Some are dumb, some are brilliant and some are straight smoke and mirrors.  And with some proper education and due diligence, you should be able to tell the difference.   But its the penny stock newsletters that shake the penny stock markets.  Here's a good saying to remember when playing penny stocks, “if it sounds too good to be true, then DON'T HOLD IT LONG TERM!”

Even with  a lousy penny stock,  if there is an effective awareness campaign running on it there is a good chance that at some point during the campaign YOU CAN PROFIT FROM IT.   Knowing when to pull the trigger is the key.   Utilizing your trading tools properly will help you with this.

Awareness campaigns in the penny stock world are mainly run by newsletters and press releases.  An effective campaign will result in increased trading volume, hopefully positive volume.  Wall Street firms won't cover penny stocks, so how else do these start ups get the word out about their company?

So let'ts get back to the bag holding bit.  Even the most experienced penny stock player gets stuck in a stock now and then.  But you won't see him or her running around bashing the company or the newsletter.  They quickly identify that its not a profitable situation, minimize their loss and move on.  Experienced traders don't become attached to the dream!  They don't feel duped or scammed because they know its all about the trading volume and momentum.  Some traders don't even look at the name of the company, they just look at the ticker and check indicators about the volume.

How can you minimize your loss and maximize your profit as a penny stock trader?  

  • Again, start by realizing that most of these penny stocks are risky and not long term holds.  
  • Follow the volume:  If the company trades by appointment, and there is a huge spread, how do you expect the price to go up? Let alone be able to sell out for a profit.
  • Learn to use your tools:  Real time quotes, real time news, real time charting, real time Level II, learn some chart techniques and a fast execution online brokerage should get you off to a good start.
  • Make friends:  After being around the penny stock market for some time you'll start to recognize familiar screen names.  You'll soon learn who is who and who you can trust.  Finding a mentor is a good idea. Joining a good group of traders doesn't hurt either.  There are lots of live chat rooms out there that have some really experienced traders willing to pass along some knowledge.  It's up to you to find one that fits your style.
  • Join a good penny stock newsletter:  Keep in mind, that if these newsletters don't put out profitable situations for their followers, they won't have any followers in short order.   Heck, join several newsletters.  This will help you stay in tune with the penny stock market, potential volume situations.  Remember from above, follow the volume.  Volume means profit potential.  And many of these newsletters will point your toward that volume.
  • Where can you find a good penny stock newsletter?  Here at, we track only THE top newsletters in the industry.  Some are daily newsletters, some are weekly, and some are special situation only newsletters.  You can find many good ones that fit your style here at PennyMotion.   Find one and sign up, find several and sign up.  From time to time we will feature a specific newsletter as a standout performer.  Just click through the posts on our website to find one you like, find their website and sign up.   You can also look in our “Top Penny Stock Newsletter” section fore ease of use.

Penny Stock Newsletters are the engines of the penny stock market.  With out them, the pumpers would have nothing to pump, the bashers would have nothing to bash, the shorters would certainly have nothing to short and those pump and dump alert services would have nothing to write about.

All that being said, there is always the off chance that you think you may have found that long term hidden gem of a penny stock, but how do you make sure?  Start by reading all the companies press releases, then read the company's SEC filings.  Match up the company claims in the press release with what the company puts in its filings.  Compile a list of questions and concerns.  Contact the company and talk to the company officers and even directors.  If you can, get a sample of the product, or service.  See it in action.  Visit the company facilities.  Basically, GET PROOF.

And, just to let you know, we too are card carrying members of Bag Holders Anonymous, we just don't need to go to meetings anymore.  So don't feel so bad.   But we have learned from our mistakes, learned how to use our tools, learned how to identify potential profit situations and we keep in tune with the penny stock market.   By creating a good trading strategy and remaining diligently disciplined you too can learn to survive and profit in the penny stock market.

By now you should already know how risky investing in penny stock are.  If you don't, you better go talk to your broker or investment adviser.  And, by no means are we trying to give investment advice, we are just sharing  our philosophy about penny stocks, and what we have learned in our many years of experience in the penny stock world.  Remember, no one forces you to push the button, so whether you gain or lose its all on you.

May the profits rise up to meet you.

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Written by John Thomas

I began my investing career back in 1998. I quickly discovered day trading, small cap and penny stocks. I was the editor of my own investment newsletter, stock promoter, investor relations, public relations and have witnessed the back-end process of taking a private company public through reverse merger and registration. That is roughly over a decade in a nutshell. During this time I learned how to identify the rats, sharks and people who truly want to help you learn about investing. Now I do research and write.
My hope is to pass along nuggets of information that could help or the very least entertain you on your way to financial success.

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