Limit Your Risk
When you enter a trade you need to determine how much you are willing to risk. Have a firm number and get out if the trade goes against you.
Every big loss started as a small loss where the investor lost control of their emotions and didn't close out the trade. When you're an investor you are going to have trades that go against you. It happens to everyone. Successful traders know how to limit losses while unsuccessful ones do not. They begin to hope and pray that the stock will turn around so they don't lose money and next thing they know a small 10% loss is now a 40% loss. At this point they begin to think the stock cannot go any lower and they hang on. Now it's a 90% loss and they finally sell. Do not let this be you. Put a line in the sand in every trade you do. When it gets over that line, get out.
There is an order called a Stop Loss Order. These orders are put below the current market and are triggered when a stock is on the way down. A stop loss order is designed to limit your loss or protect your profits on a trade.
NO ONE SHOULD TRADE PENNY STOCKS WITHOUT STOP ORDERS.
THE BEST PLACE TO PUT YOUR STOPS IS JUST BELOW THE PREVIOUS DAYS CLOSE. THIS IS ALSO THE PRICE I MENTION IN MY ALERTS. STOPS SHOULD BE KEPT TIGHT TO LIMIT LOSSES. 10%-20% MAX.
I SHOULD NEVER HAVE TO HEAR FROM A READER THAT TOOK A BIG LOSS IF YOU FOLLOW THIS RULE. THIS IS THE SINGLE MOST IMPORTANT KEY TO SUCCESS IN TRADING.
IF YOU DON'T USE A BROKER THAT ALLOWS STOP LOSS ORDERS, GET ONE.
Here is a link to ChoiceTrade they allow stop loss orders and only $5 trading fees on penny stocks. Here is a link to open an account.
http://The Capital Gains Report.com/choicetrades
Sell on the way up
When entering a new trade determine beforehand where you want to get out when the stock goes up. It helps to put in a sell limit order in at the same time you buy the stock. Then when the stock hits this price you are taken out and don't have to struggle with wondering if it's going to keep going higher. Book your profits.
Get used to booking profits no matter how small. It may help to learn to take small profits when you begin. There is nothing wrong with taking 10%, 15%, or 20% profits on trades. This gets you in a winning state of mind and makes taking profits much more of a habit. You do not need to buy at every low and sell at every high in order to make a lot of money in the market. You just need to be consistent.
Everyone wants to hit home runs when they buy penny stocks but the fact is most investors will lose more money hanging on for the big winner instead of taking consistent profits. Do not be greedy. This will be the death of your trading account.
You should always use trailing stops to protect your profits after a stock has gone higher. For example if you get into a stock at .10 cents and it runs up to .20 cents you want to protect your profits. Some people will decide to get out completely and that's smart but some of you may want to stay in the trade to see if it goes higher. The best way to do this is to use a trailing stop. In my example your stop may be .18 cents which means if the stock comes down off .20 cents and gets to .18 cents your stock is sold.
This protects your profits. A mistake that many traders make is allowing a profitable trade to turn into a break even or losing trade. Don't let this happen to you. Use trailing stops. If the stock continues to move up you move your trailing stop up with it to continue to protect profits as you go.
Always book profits no matter how small. Put the money in the bank.
The Capital Gains Report