To be successful trading small cap shares in this day and age, its necessary to have a decent grip three critical areas. By focusing most of your Microcap Millionaires research and picks while also having a written plan for how you will use the three M's of penny stock trading. The mental / psychological, money management, and technical / fundamental methods are the main areas to focus on when trading hot penny stocks. This article will introduce you to these factors and how they relate to trading with Matt Morris microcap stock pick advisory reports.
Because trading in shares under the price of $ 10 tend to experience more volatility and large price swings then the big caps, the feelings of fear, greed, hope and despair are multiplied as your investment either sinks or soars, based on the action of buyers, sellers, penny promoters, market markers and so on. The main point I want to make about trading psychology is that first, a trader needs to accept the fact that each trade has an inherent risk of loss and failure. Accepting this risk and trading anyway, it is the true key to success. Especially when you are first starting out, opening a positing for something as small as a $ 1000 or $ 500 can cause huge emotional swings. You need to be able to manage your risk (discussed in detail further) but also be able to mentally accept that risk as part of your trading business and go on with it. This is because of the fact that future is unknowable. At any point, other traders can buy or sell into the market and this action will either prove you right and pay your profits, or prove you wrong and separate you from your hard earned money. Know and accept your risk and you can trade and invest while still getting a proper nights rest every night of the week. But in order to actually measure your risk, you are going to have to become a mini expert in the subject of microcap millionaire money management (M4).
Money management is the discipline of measuring and tracking how much you will allow yourself to risk during a single trade, during a single trade day, and how much you can possibly lose in any given trading month. This really comes down to deciding in advance, how much you can allow your self to lose (if the trade isn't able to work out). Then you will also want to measure what kinds of commissions you will be paying and include that. This way you can make specific decisions as to how many shares to buy, and how far you could let those shares move against you before bailing out. For properly capitalized professionals this tends to be 1 or 2% of their trading account which is risked on any one single trade. This is even when trading multiple positions. Smaller traders who are sensitive to risk may risk 3-5% of their account totals on any one single trade. However, new amateurs with limited capital will often risk 10-20% of their accounts on any single trade. This is a very important decisions because the less you risk the longer you will survive before the inevitable losing streak comes around. For example, when you risk 10% of your trading account, a string of 10 to 20 loses could either wipe out your account or it could take a serious chunk of your equity. But with that being said, a trader could also be doubling his account every quarter when he / she is making big moves like that. Decide what amount of risk is right for you, make a plan and stick to it. This way, you give your trading methods a limited downside, while opening up the possibility of significant upside.
Trading methods out there these days are many. When it comes to penny stock trading, there are various nuances you will want to consider while coming up with a turnkey microcap trading system. You have some classic methods of technical analysis that apply nicely to small caps. Daily Japanese candle stick patterns are very helpful. The pin bar, harami, engulfing patter, morning star, hammer, dark cloud cover and others are very helpful in determining trend reversal trades as well as continuation trades. Classic chart patterns can still be of some use with the small stocks. Trends and trading ranges are simple to identify on old charts. More involved methods like Elliot wave often aren't as helpful as they are otherwise in larger volume, liquid markets. Same goes for many studies of Fibonacci numbers. Moving averages, channels and momentum indicators like RSI, stochastics, MACD and ADX are some of the favorite tools of traders like Matt Morris. Now when discussing fundamental factors, this is a whole other arena when it comes to the penny stocks set to double. SEC reports seems to routinely contain vital information that is only skimmed over in news releases but if decoded can give various hints of where a companies share value is headed. Earnings reports are great to watch. If you are trading small caps on NASDAQ, and Russell2000 stocks then you can spend time analyzing specific sectors but also you can look to the index before buying or selling a specific companies stock. Pink Sheets and OTC on the other hand are a little harder to analyze based on the overall markets performance. Often the penny stocks just follow the general market when there isn't any other news hitting the market. Methods are many and when you are just starting out it can make your head spin. But with time, and guidance from microcap millionaires, you will get an eye for what specific technical and fundamental factors are best for trading the hot penny stocks.
The trading business is a very large and complex industry. To many beginners surprise, there is much much more to this business then one would image when they are first exposed to the trading world. With that being said, today we have been able to discuss and dig into some basic considerations of using the three M's of successful microcap millionaire trading. You learned about trading psychology, you learned about money management, and you learned about how trading methods differ with small caps and what to do about it. Obviously there is much more to learn and more to discover on your journey, trading penny stocks that's are set to double.
Source by Peter Hill