Finding success in the stock market is so much more than learning patterns. You need to have the right trading mindset.
Don’t get me wrong, patterns are essential and important. In fact, I think anyone can learn my penny stock patterns that present themselves every day in the stock market … As long as they put in the time…
And as you start your trading career, it’s imperative that you work to develop the right trading mindset.
Your mindset is the foundation for every trade and your entire trading career. It’s something that you have to hone and refine all the time. I know that personally from trading for 20+ years. If I don’t check my mindset, I run the risk of overtrading.
That’s exactly why I’m dedicating this post to the trading mindset. Because the wrong approach to the markets can lead to loss of confidence, chasing trades, and even blown-up accounts.
Let’s get to it!
Table of Contents
- 1 What Is the Trading Mindset?
- 2 The Trading Mindset Conclusion
What Is the Trading Mindset?
The trading mindset is really a set of rules for how you’ll conduct yourself as a trader and in the markets. And you can actually apply it to a lot of other aspects of life — not just trading.
During my two decades of experience in trading penny stocks, I’ve learned key facets of the trading mindset. That’s what I base my trading rules on. My top students know just how important it is to follow these rules to become self-sufficient in the markets.
So let’s break down the rules that go into the right trading mindset … and the biggest mistakes you should avoid as a trader.
Let’s start with my #1 rule…
Cut Losses Quickly
Veteran traders: when a stock breaks below a key level, exit the position safely
Pumpers: The drop is due to weak hands/short sellers, keep holding or you're my enemy, this is a longterm hold not a day trade
Veterans: cut losses quickly
Pumpers: It's not a loss until you sell!
When it comes to trading penny stocks, this is the most important thing both new and veteran traders focus on.
My newest six-figure students like Matthew Monaco, Jack Kellogg, and Kyle Williams swear by this rule.* It’s a big part of what’s helped them to grow their accounts. It’s not just how you win — it’s also how you manage your losses.
You have to cut losses quickly because penny stocks are volatile. They can make rapid gains and lose them just as fast. Too many newbie traders think these crap penny stocks will be the next Amazon or Netflix. But that’s just not the case.
Learn the patterns and how to trade them. When a trade doesn’t go as you expect, get out.
When I trade, I keep my losses small and let my winners run — even if it’s only 20%–30%. Which brings me to my next key rule…
Learn to Take Singles
Veteran traders: take singles, 10, 20, 30% gains add up over time, don't go for home runs
Pumpers: It's going to the moon, minimum of 10x your $, more likely 100x your money
Veterans: Lasting wealth is built one trade, one single at a time
Pumpers: Home runs only, no singles!
Too many traders want every trade to be a 100%+ home run. We’ve seen some astounding moves in the wild pandemic market … but that’s not typical. And even Wall Street aims for about 8%–10% per year.
After learning that lesson the hard way, I shifted my strategy to trade more conservatively. And if you’re managing your risk, those singles add up over time. That’s how you build a small account, and exactly what I teach in my Trading Challenge.
Here’s what you don’t do…
Hold and Hope
Veterans: penny stock research is a sideshow for companies to do financings/insiders to sell at pumped up prices
Pumpers: I have the best research, I talk with IR daily!
Pumpers: Hold longterm!
That’s the wrong trading mindset. Maybe a few of these sketchy will become real companies one day. But I don’t like those odds, and I’m not that patient. I’d rather take my quick singles trades and let them add up.
Artificial Intelligence Technology Solutions Inc. (OTCPK: AITX)
You don’t need to aim for 100% or more for winning trades. Again, trades like this add up over time. I’m up over $5.5 million in trading profits over my past 20 years of trading.* And I didn’t do it through holding and hoping.*
(*My results, along with the results of my top students are far from typical. Individual results will vary. Most traders lose money. My top students and I have the benefit of many years of hard work and dedication under our belts. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)
Notice I mentioned former runners? This is exactly why you need to…
Study the Past
Veteran traders: the market doesn't owe you anything, 90% of traders lose due to lack of preparation
Pumpers: God wants you to be rich, I didn't pick this stock, God did!
Veterans: Study the past, history repeats
Pumpers: This is a breakthrough technology, ignore the past!
History repeats. I often say I’m just a glorified history teacher. I’ve been trading the same patterns for over 20+ years in the market. It’s not exactly the same — I have to adapt to what the market is giving me right now.
You have to prepare. If you study what stocks moved in past pandemics like Ebola or SARS, you’d know to watch a lot of stocks that spiked in the current pandemic. I broke some of those down in this post.
There’s not just one thing you can focus on in the markets. You have to learn it all. That’s how you…
Work to Become a Self-Sufficient Trader
Veterans: NEVER follow alerts/picks from anyone, learn to be self-sufficient
Pumpers: I want as many followers to buy my plays because that's my strategy!
Veterans: All penny stocks are junk, research is a joke
Pumpers: This penny stock is the future & will change the world!
All the watchlists and alerts I send out to subscribers aren’t to get them to blindly follow my picks. In reality, the stocks in the penny stock niche can move so fast that by the time I send out the alert, it’s too late.
So why do I send them? To teach the process. I want you to understand why I picked those stocks. It’s another opportunity for you to study. What was the catalyst, the volume? How high did the spike run? Was it a short squeeze — and how can you tell?
There’s something you have to always remember…
Discipline Is Key
Veteran traders: never get emotional about a trade, create a plan & stick to it, discipline is key
Pumpers: I'm in love with this company (who's paying me in shares/$ I'll never discuss publicly)
Veterans: treat trading like a business, be meticulous
Pumpers: Let's get coke $!
You can learn all the right rules and strategies, but if you don’t stay focused and disciplined with the right trading mindset … you’re putting your trading career in jeopardy.
This another lesson I’ve learned the hard way. It’s why I trade like I’m a retired trader. A setup has to be so good, I’d feel awful for missing it.
That mindset helps me to not overtrade. Not gonna lie, it’s hard in this wild market. There are SO many hot plays. The volatility is insane. And I’m thrilled that all my wins will help someone in need since I donate all my profits to charity and causes like my Yemen fundraiser.
Get smart tips for navigating this volatile market — and any future volatility. I put together this no-cost two-hour video lesson to help you get through it. Get access to “The Volatility Survival Guide” here.
I’d rather see students make a few good trades per week than take a bunch of subpar trades. That’s especially true if you trade with a small account. If you use a cash account and aren’t limited by the PDT rule, it can be easy to take more speculative plays rather than waiting for a great pattern.
Don’t do it! And in this niche, always…
Expect the Worse
Veterans: It's very low odds to buy when a pump goes red on day 3
Pumpers: Let's coordinate this pump with a few other promoters, we create our own odds!
Veterans: Never trade with anyone else, expect the worst out of everyone
Pumpers: Let's get multiple chats buying together!
When I started in the markets, I was a young guy looking to make money in the markets. I had to learn to trade the hard way — through trial and error. Along the way, I had some big wins … and losses. I didn’t have a trading mentor.
There was no one willing to share what they knew about this industry.
People love to hate on penny stocks, but they don’t understand how to play the game. They don’t understand how to slowly build a small account. So here’s my last tip on how to get into the right trading mindset…
Build Your Knowledge Account
And when you’re ready for the ultimate trading commitment, you can apply for my Trading Challenge. That’s where all my top students started. It includes access to the best chat room and trading community, live webinars, DVDs, and so much more.
It’s not easy. It’s taken all my top students years of hard work and studying to hit their market stride. But if you’re in the Challenge, you can trade right alongside them.
The Trading Mindset Conclusion
At the end of the day, there’s no single right way to trade.
What matters is your right trading mindset. Without discipline, it’s near impossible to make it in trading or to grow and protect your account. You gotta follow rules like cutting losses quickly and taking those singles.
You have to study every day.
What’s your biggest trading mindset issue? Let me know in the comments below!