Have you ever wonder why you keep losing money, but yet cannot see the real reason for this?
Well this article is tailored primarily for you. If you’ve been trading stocks, buying shares from here and there, you should have a pretty good idea of how we lose money trading.
But if you don’t know why you’re losing money trading penny stocks, you should continue reading this article
If you are not yet a stock trader, more precisely a penny stocks trader, that’s even better for you because you have not yet got acquainted to those bad habits us traders have.
Knowing this information should help you to at least avoid some of the mistakes they are making. Because anything that can help you in this market should not be ignored.
Making several trades in one day
Many penny stocks traders usually take on several transactions a day. Remember we don’t hold penny stocks too long, or we risk losing our money. Having shares from too many stock providers do cost a lot because brokers have to be paid per transactions.
This is good for brokers but totally not in our advantage. Don’t get me wrong, it’s a good thing to own shares from different companies, but going to the extent where you are dealing with too many companies is a no no. You do not want to throw your money at brokers like this.
The average broker fee per transaction is $7.96. Let’s say you buy shares from 10 companies in one day; that comes to a total of $79.60 just to buy the shares. You would have to spend another $79.60 again to sell your shares when you want to.
In total, that’s a little under $160 for the entire transaction. This money could have be used for something else, money does not grow on tree, like everyone says. You should not waste your money like this because there are many people who are in need out there that you could instead help with this cash.
Buying additional shares from a losing stock
Some penny stocks traders sometimes buy more shares from a stock that they own while the price is dropping. I even have some very close friends who have committed this error. This is a mistake that you should never make because you don’t know what will be the next move of this stock.
You may think that this stock has some very promising news out there that have just been released which could see its price spiking up very soon. Unfortunately, there are times those companies with fresh and good news release do not do any improvement in their stock’s price. Even worse, some of them may even drop in price making the result totally the opposite for you.
In penny stocks trading we do not do such thing, it may work for the regular stocks, but it is very difficult to use this strategy for penny stocks. For this reason, you should never buy more shares from a penny stock that is trending down.
If you were already on board with the stock, meaning you already have some shares, it would be better to watch it a little to see if it will go back up again in price. But if it’s still going down I would take the loss and move on to the next stock. Don’t hurt your money with silly strategies that may turn back against you.
The stock market is already against you, right? Well, you should instead look for ways that could help you survive in this difficult market. Don’t augment to your misery, trade smart, and cut your losses. By doing so you could have a better chance at wining with your positions.
Buying shares when the stock is down-trending
We all like to buy shares from penny stocks when their prices are low, this is common sense. Although some people would argue that this is not a good method. Nonetheless, some penny stocks traders usually wait for a stock’s price to get very low before they make a move and acquire some positions. In my opinion this is called setting yourself up for failure.
Like I said before, there’s no way you can predict which way a stock will go, especially penny stocks. Although stock quotes could be somewhat helpful, but penny stocks are very unpredictable and dangerous to trade. If you would wait for them to be trading close to “0” before you buy some shares, you might as well buy a couple of lottery tickets.
Buying some lottery tickets in this case would lose you less money than you would by trading using such a strategy. I think this is why many people characterize penny stocks trading as straight gambling. If you’re trading using this method, you may be gambling like many people would say.
Studies have found that almost one half of the total traders are losing money. But many of them play a big role in their losses by not trading smart. There are many aspects in trading that can hurt us financially, yet many of them are very manageable.
The problem is that most of them don’t know anything about the market besides registering to a broker, then start trading.This is how easy it is to start trading penny stocks, but trading is one thing, winning is another. We are all in it to win, though wining is always hard in everything.
If you play or used to play sport in school I’m pretty sure your coach used to tell you all the time that practice makes perfect. Although you can never be perfect in penny stocks trading, it is not an exception to this rule. It does require practice, a lot of practice in order to get a hang of it.
Learning how to trade in the stock market
If you have not started trading penny stocks yet, do yourself a favor and start learning about this market. After you done researching if you still think it is the right market for you, then do yourself another favor by starting practicing.
Practice from stock market game can actually help you in diverse ways. Many penny stocks guru will tell you the same thing, trade in stock market game until you feel ready for the real market. Because you want to trade to make money, not to lose your hard earned money, which may be the case if you don’t know what you’re doing.
Let me share two stock market game websites with you, which can be very beneficial to you if you take my advice in consideration.
- Wall Street Survivor: This website has an approximation of 700,000 users currently learning by doing. Learning by doing is the best way to learn anything. As hard as it is to be successful in penny stocks trading, stock market game can give you a huge push on your way to attend success.
- HowTheMarketWorks: This website is rated as one of the top five by Mashable. It is owned by the same company that owned Wall Street Survivor. Once you are registered with this website you will have $25,000 simulated available to you to start trading.
Taking on positions with no strategies or plans
Do you trade with no strategies in place? Big mistake, all good penny stocks traders have their own strategies and plans setup before they start trading a stock. You should always have a plan B, C, or even D because penny stocks are outrageous.
By having good strategies the chances of losing too much when you are unlucky is always decreased. If the day is not for you, instead of losing one quarter of your money or more, you can lose half of a quarter. This can make a really big difference in your account.
Someone who does not have any strategies planned prior to start trading penny stocks does not have a goal in my opinion. With no set plans you don’t know when you should take your profit or stop the loss. This is definitely not the right way to trade.
We all lose money, if I say I have not lost any money trading penny stocks, then I would be being dishonest to you. I have my good days and bad days just like you. However, with the use of good strategies I manage to keep my losses at minimum.
You too can cut your losses given that you implement these advises through your day trading. Don’t let your own errors cause you to lose money.
Practice, practice, and more practice, one day you will be glad that you took time to learn and develop your own strategies.