Update 11/21/17: I have traded this for quite a while. I had a lot of success with it, but my account has grown enough that I no longer can move the needle on my account much with these trades. These trades are nice for building a smaller account.
If you are in the same boat, move onto my Working Person’s trading guide where I detail SuperStocks/Episodic Pivots or check out my Cryptocurrency Trading Guide.
Penny Stock Land
I have never traded penny stocks before. It is a risky market, and I have always shied away from it because of that. That is until I ran across a strategy that I like. The key to mitigating risk here is to not load the boat with your entire account in these. Please do your research before jumping into this.
This is a newer strategy, one that I may or may not continue. I have tried other methods that I no longer trade as well. Some work for you some do not. It is basically Quickfingersluc’s Penny Stock strategy adapted for people who cannot watch the market all day. My problem with this strategy is not that is does not work, it is that I have to use such a small amount of my portfolio due to penny stock liquidity issues that it may not be worth it.
I use a very small amount of my brokerage account to trade this. I do this for two reasons. First, every time I try a new strategy I always start small. Hopefully, you can see the logic in this. Second, penny stocks simply cannot be traded with large sums of money. The smaller dollar volume makes it hard to get into and out of positions with large amounts of capital.
To determine what stocks I would be willing to trade I went through and sorted all of the Penny/OTC stock by the 50 day average dollar volume in Telechart. Here is the PCF for that:
50 Day Dollar Volume PCF
(C * V + C1 * V1 + C2 * V2 + C3 * V3 + C4 * V4 + C5 * V5 + C6 * V6 + C7 * V7 + C8 * V8 + C9 * V9 + C10 * V10 + C11 * V11 + C12 * V12 + C13 * V13 + C14 * V14 + C15 * V15 + C16 * V16 + C17 * V17 + C18 * V18 + C19 * V19 + C20 * V20 + C21 * V21 + C22 * V22 + C23 * V23 + C24 * V24 + C25 * V25 + C26 * V26 + C27 * V27 + C28 * V28 + C29 * V29 + C30 * V30 + C31 * V31 + C32 * V32 + C33 * V33 + C34 * V34 + C35 * V35 + C36 * V36 + C37 * V37 + C38 * V38 + C39 * V39 + C40 * V40 + C41 * V41 + C42 * V42 + C43 * V43 + C44 * V44 + C45 * V45 + C46 * V46 + C47 * V47 + C48 * V48 + C49 * V49) / 50
I went through the top 30 or so and added them to the list of “tradeable” penny stocks. From there I simply placed bids at what Lucky36Luc defines as the “panic” level. It is important to go through your orders every evening to make sure you bid is still low enough. I simply scroll through my IB platform and eyeball it.
This is a strategy that I think could be very useful for smaller accounts to grow them quickly. At some point you may run into liquidity issues as your account grows, but that is a good problem to have.
That is it, it is a really easy method. Any questions feel free to ask.
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