Daytrading, Gapping, Swingtrading

Proper money management is critical when trading the stock market. You will notice that the majority of stocks we trade are otc-bb stocks, although we also trade some nasdaq and amex stocks on occasion. The main and most important reason we trade otc-bb stocks is because of the amount of money we can make by doing so, but trading otc-bb stocks is not the same as trading normal stocks, so let us explain.

First of all I want to stress that what I'm saying here is not "set in stone", another words there are exceptions. If you look at our record you will see that we can make 100% on a stock in one day, and even much higher! This is the equivalent of a stock starting the day out at $30 per share and doubling to $60 a share! Our otc-bb stock may only be selling for .005 at the start of the day and end the day at .01, which is double or a 100% gain. Or our otc-bb stock that's on the picture up at the top of this page, ACTC, started the day at roughly .40 and closed at roughly 1.85, over 400% gain!

So mathematically you start doing your calculations which might go something like this: "so if I bought ACTC using $5000 of my money I would have made $20,000 in one day", "if I bought ACTC using $25,000 of my money I would have made $100,000 in one day".

While this makes sense mathematically, its not practical. If you wanted to buy $25,000 worth of IBM's stock, it wouldn't be a problem at all. But if you try to buy $25,000 worth of an otc-bb stock you wouldn't get filled, you would probably get "partially filled", it may be a very small amount or a fairly large amount, but $25,000 is too much money. $5,000 is certainly very possible, it just depends on many factors, volume is crucial, and we only trade stocks with good volume, however often times we'll get in early and the stock won't get the kind of volume we thought it would for the day, in that case there wouldn't be a lot of volume to buy shares, and if you did buy them not a lot of volume to sell those shares.

If you had tried to buy ACTC with $5000 worth you could have gotten filled, however not so easily, it just depends on when you tried to buy and at what price, it can sometimes be a trick to buy and sell otc-bb stocks. If you had tried a much smaller amount, say $1000 worth you would have gotten filled much easier, and had you sold it at the end of the day you would have made $4000 for the day, not a bad days work.

In the event you learn enough about the market through watching our signals to start trading the market on your own we recommend you limit the amount you try to trade these type of stocks with in general. A good rule of thumb is $500 to $2500.

There are times you could go much higher, especially on nasdaq and amex stocks, and on certain occasions even otc-bb stocks. But no matter how high you go you should only use as much money as you're willing to lose in one trade. A good rule of thumb is to use 5% of your account. Although if your account is only $1000 then you're going to have to use a higher % from your account. And if your account is $100,000 then 5% is $5000 so it may be difficult to use that much on each trade.

If you can only remember one thing, remember the most crucial rule in all of trading, never hold onto a losing trade, learn how to take the loss and get out of the trade. Don't hold it and hope it will go back up, simply make it your number one rule that you will exit all trades at a certain % of loss. If you had a $1000 account and decided to use your whole account on one trade then this rule would be even more critical, and you would need to limit your loss to a very tight %, whereas if your account is $5000 and you're using $500 trades you could easily sustain a 30% loss on one trade.

When you're finally ready to start trading the stock market and think you're ready, don't try to get rich, but as your account grows so can your trades. Be mathematical in your approach, and be like a robot which has been programmed to sell all positions that reach a certain % of loss, therefore when they reach that % of loss you have no choice but to sell them because of your programming. And better yet, when you become skilled as a trader most of the time you can get out flat (even), and only lose the cost of the trade itself.

It sounds like such an easy thing to do, such an easy thing to remember, but it isn't. This is what happens. you buy a stock, you see it has amazing news out on some new product, you go to the message boards and listen to other people talking about this great new product, people are saying its the biggest thing since the computer and you start imagining the stock price is going to hit $50 per share within a year or two, your ship has come in! You start to believe this more and more, you convince yourself that this is going to be huge and you're in on it. So when trading starts again the next morning you just "know" its going to takeoff.

Then reality hits, the stock starts moving down, but no way are you going to sell because you know this is going to be big, and you don't want to miss the big move up. Then the stock goes even lower, now you don't want to sell because just a few minutes ago you had a nice $500 profit and now you only have a $250 profit, plus its going to the moon soon anyway. But then the stock goes lower and now you are break even in it, so now certainly you don't want to sell because it would be a waste of the cost of the trade. So you hold onto it. Only now it goes even lower, now you are down 10% in the trade, now you really don't want to sell because you certainly are not going to take a loss on a stock which is going to be $50 per share in one or two years, so again you hold onto it. And of course it goes even lower, now you're down 30%, and soon 50%, and then your stuck in the trade.

This is what happens to most everyone, and worse because when they think its going to $50 per share they put their whole account into it, trying to become rich on one trade, and then they hold it and ride it down into oblivion and lose their whole account, and that money becomes "dead money" because you can't use it anymore. Don't let this happen to you!

Two things which will keep you from getting into trouble:

#1: Always exit the trade at a certain % of loss that you determine before entering the trade.

#2: Use an amount out of your account that you can afford to lose if the stock went bankrupt overnight (rare), and an amount where if you lost 30% on one trade it wouldn't hurt your overall account.