There are traders out there who hold and hope for the stock to move higher…
As for me, I don’t like to hold onto a stock for too long in hopes of the outcome I wanted.
Trading isn’t supposed to be like a carnival game where your chances of winning are slim…
For every trade you plan to make, there is a process that needs to be followed to help you be better prepared for success.
Before any of my trades, I complete multiple steps, but one step is always on my mind…
And that step will help me gauge what my profits or loss could be from every trade.
You will never be profitable 100% of the time on your trades, you will ultimately suffer losses…
But how you limit your losses through discipline is going to help you as you pave your way for your future.
I don’t trade penny stocks because they are good stocks, I trade them because they are volatile…
And if you are not careful with your trade, it can be a disaster.
Today I want to share with you why no trader should hold and hope when a trade of theirs fails…
So see what trade would’ve been a disaster if you held onto it and why.
Table of Contents
Identifying An Entry Point
As we prepare for any trade, there are specific indicators that I look for every day before determining if a stock is worth it.
I am not looking at stocks that have low volume, are on a constant downward trend, have no historical movement…
I look for stocks that are big percent gainers, have high volume, and have the ability to spike 10%, 20%, or even more.
Reading a stock chart is crucial for any trader because you will start to notice that the same patterns tend to repeat.
Before every trade I make, I always have an entry and exit point in place.
Take a look at one of my recent trades…
For every trade, I always have a plan in mind…
Holding and hoping that a stock is going to move in the right direction is a fool’s game.
Trading is about planning every step of the way, and in many of my trades, I am meticulously planning where to buy and sell.
Guessing is never the right approach, and here is an example of why you should wait for the perfect setup to come to you…
And not just guess when to buy.
Failed vs Strong Breakout
Many of you may ask how I may know if a stock has a solid breakout compared to a failed breakout…
And today, I am going to show you what a solid breakout looks like compared to a failed breakout.
Earlier in the week, I mentioned this in the chatroom for traders to see…
So let’s take a look at what I saw with XCPCNL Business Services Corporation (OTC: XCPL)
Over the last several days, you may have heard me talk about XCPL…
This stock has been a hot OTC runner that was setting up for a multimonth breakout, it had the volume to do so…
But then, it failed…
Looking at the multi-month chart, you can notice that XCPL has tested this $0.009 resistance level several times.
As it struggled to break through, you notice a significant amount of sellers shorted that stock the other day based on its key resistance area.
This is why I always look back at the history of the stock to identify these key levels, because looking at a smaller window, you wouldn’t know what the stock may be up against…
And you may just think it’s going to break out.
Here you can see the volume increasing, the stock is opening higher in the morning…
But then, it fails…
Many traders may think “it has to keep going” and then ultimately the stock turns in the opposite direction…
And plunges over 50% from where it just was.
Imagine if you invested $1,000 into this stock hoping that it would spike through and keep going as it briefly broke over the $0.009 resistance level…
That $1,000 now becomes less than $500 and you most likely wiped out the majority of your other gains with this one trade.
But now, let’s shift our focus to a solid breakout pattern…
Meta Materials Inc. (OTC: MMTLP)
Here you can see that MMTLP had several successful breakouts over the last few weeks, but I want you to focus on something key that made this a successful breakout.
Here you can see the stock’s volume started to ramp up, going from nearly $2 a share up to nearly $8 a share in just a matter of days.
Shortly after it hit its highs, the stock sold off and just dipped below $4 a share, before it started its multiday run.
As the stock started to run up, the stock was squeezed over the $8 mark, holding above that mark.
But that’s not all, the stock got another significant push of volume to help propel it even higher than the previous $10 a share mark that was resistance for a few days.
Here you can see the chart on a daily level where the volume has significantly increased from previously to help push the stock through key resistance areas.
When a stock breaks out, you want to make sure it doesn’t dip back down like XCPL in just a matter of minutes, or in a day…
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You want to make sure the stock is able to hold its previous resistance levels and have it become a new support level before the stock can continue higher.
Final Thoughts
Penny stocks are not stocks that I am holding for the future in hopes to make millions over the next several years…
These types of stocks require traders to be able to spot these opportunities and make quick profits when the time is right.
Trading is about timing, and finding the right opportunity at the right time is vital.
I have met many traders who have held on to stocks in hopes they would rebound…
Or had FOMO about a recent trader another made.
It is important for all of you to understand the big picture and be able to be self-sufficient in finding these opportunities…
And knowing when danger may be ahead.
Continue to study and be prepared!
Cheers,
Tim
P.S. – Trading is all about waiting for any opportunity when it pops up. Sometimes if you drag your feet and miss it. Here’s one that’s still on the table.
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