Welcome to this trading alert site that comes along with a new stock picking approach. Instead of trying to be too clever we trade the small cap markets statistically. Look at our basic trading system for penny stocks and decide yourself whether classic investing methods make more sense or not.
Trading large stocks, where tons of information are available, doesn’t yield necessarily a profit. This is an amazing fact, demonstrated over many years by the meager performance of mutual funds.
They know everything, but it doesn’t help. Simply amazing.
Our penny stock trading method uses price potential and price action. Only additionally it relies on analyzing fundamental data of a stock pick. Otherwise it is true fuzzy trading. Especially we don’t want to outsmart the market. If this seems to be impossible for the big guys in the large cap markets, it should be even more inappropriate for the small investor gauging penny stocks.
Still, we have here a paradox. Using trading alerts from a penny stock market expert is a wise move. Someone who knows more about this part of the trading world and who can put his full energy into the hunt for new penny stock picks could deliver the efficient method for screening the market that our system needs.
But — we have to “wash” these trading alerts. We do this with the four point trading system outlined on our home page.
Filtering stock alerts in a second step may sound simple, even embarrassing simple, but why not?
Analyzing the stock market with sophisticated methods by a staff of well educated fulltime employees, which is done by large funds, has an effect of less than zero. The typical fund underperforms the S&P on average. And the typical private investor probably underperforms the funds.
So, why not bet on price potential, biased with some fundamental potential, which is, of course, also only of statistical nature? Data for fundamental analysis is rare in the penny stock markets. Or it is forged…
Ahh, there is it. The scam problem. Astonishingly scam is no real problem. It only adds to the volatility of a stock. Eventually this is what we want. Scam adds to our primary motor, the price potential. We just need the right trading technique for small cap and penny stocks.
Of course, we need something else in a market where pump and dump is our daily bread. And that is money management. But this is not difficult either. Essentially it is the same as with larger stocks. Don’t put all your eggs into one basket. Don’t use margin, which is impossible for real penny stocks anyway, don’t use borrowed money, and don’t short stocks.
But aren’t penny stocks often too pricey because all this pumping and dumping? Yes, that happens, but it doesn’t mean that you have to bet on the down move. It will come, but you don’t know when. Perhaps your account is extinct because of the temporary highs the heavily shorted stock made in the mean time…
Shorting a stock limits your maximal gain to hundred percent but exposes you to a virtually unlimited loss. We want the opposite!
Exploiting this pump and dump game works the other way round. Pick stocks that meet our trading criteria and hope for the pumpers to give an extra boost to them. We are shooting for multiples, gains of more than hundred percent.
Shorting stocks is either for suckers or for experts. And experts in the stock market are people with insider information. This is criminal and because we don’t want to be criminals we are no experts. We just have a clever trading system.
This system works even with mediocre trading alerts. It doesn’t need high probability trades. It is okay if your trades average no more than a fifty percent hit rate. Of course, more than that is also welcome, but the main quality criterium for our stock picking source is that it finds high potential trades. It is the possible price potential on which we are betting.
So, our trading alerts don’t need to be perfect to succeed in the penny markets. We just use our simple trading strategy, have the right money management for penny stocks and reuse trading alerts of some source that is somewhat trustful.
Trust – the dreaded word in the penny stock world. It is important but not paramount. You can even make money off pump and dump, without being the pumper, of course. The result of pump and dump is volatility. With the right trading system it is possible to exploit the price movements even without knowing about the pump explicitly.
Essentially it doesn’t matter why a price rises. Whether there are investors who believe a stock moves because they have drawn some smart conclusions or because someone else pretends to have first hand information about a stock, the result is often the same, namely a purely randomized outcome.
In the end our basic investing method of concentrating on stocks that once stood much higher and show some new price action combined with a thorough money management will save the trading day. The right stock alerts are only the icing on top of our trading system cake.
