I am new to this forum and I am hoping someone here will be able to help me.
I want to be a trader in OB and PK securities. I have started with "Short Term trading in the new stock market" by Toni Turner. I hope to finish it by this weekend. Do you guys think if this book is sufficient for info purpose or do you guys recommend another book for a better understanding of OB and PK securities.
And also which is the best source to get all the info about the OB and PK securities? I mean where do you get the latest news from about mergers and what not.
Any other advise/suggestion will be highly recommended.
posted
Most important suggestion you can get is to paper trade first. I have yet to meet a single person that has heeded that advice (myself included) and I've also yet to meet a single person that didn't lose a bunch (if not all) of their money within a few months (myself included again).
In case you don't know, paper trading is trading without real money. Keep track of when you would buy and sell, without actually using real money. Three important things to consider are 1) commissions 2) bid x ask 3) execution time.
1) Commissions: Commissions are obvious, but important. For penny stocks flat commissions are important, as brokers like Scotrade add extra fees for stocks under $1. Which can really eat profits. Other brokers charge an extra fee PER SHARE, which, if you buy $500 worth of a stock trading at .0001, could actually be many multiples of the actual purchase price of the stock.
2) Bid ask importance: If you see a stock that you want to buy, remember that you will have to buy at the ask. One trick that pumpers will use on the boards is to use the bid and ask incorrectly. Like say the bid x ask is .01 x .02. If the last trade was at .01 when a pumper starts a thread, and then a trade goes through at .02, they will claim that you should have listened to them, as you would have made 100% gains. In reality, if you had bought when they "told you to" you couldn't have bought for .01, you would have to buy at the ask, or .02. Further, if you wanted to sell, you'd have to sell at the bid, which is .01. So in reality, you would have LOST 50%, and not MADE 50% like the person claimed. there are always times that you can get filled for a buy on the ibd and a sell on the ask, but for paper trading, in order to get a real feel for it, ALWAYS assume that you won't.
3) Execution timing. Say you see a stock running, and you decide that you want to paper trade it. When you see it, it's at a bid x ask of .0020 x .0021. You mark yourself down as buying at .0021 at the ask, just like I said in point 2 above. Now it's 2 minutes later and the price is skyrocketing, now up to .03 x .031. You're already up almost 50%, right? Well, probably not. In fact, by the time you put in your order, the price was probably already significantly above .0021, and you would not have gotten any shares. In fact, sometimes you'll put an order in at the ask, and minutes will go by without you getting filled, and then the price will go up and you still didn't get filled. that's why you need to keep an eye on the boards. If you see people saying that they had an order sitting for 10 minutes that didn't get filled, and they missed the run, you should assume that your order would also not get filled.
These are, in my opinion, the best and most accurate way to paper trade, and to get a feel for if you can do well at this or if you'd lose a bunch of money.
And if you paper trade and "miss out" on some big gains, don't fret it, because you will most likely "miss out" on far more losses.
the first week that I traded I made over $10,000 from a $2,000 starting point. Within a month I had lost every penny. there are countless other people that have done the same. Never assume that you'll be different.
As far as books, etc, I can't help, because I think there is no substitue for actually doing it. Someone else will probably give you some good recommendations, but hopefully my post will be helpful as well.
Thanks so much for your message. Everything you said makes a lot of sense.
And where do people get the latest stock information about LOI, Mergers & Acquisitions? And is it recommended to subscribe to some Stock Scanner? Is there any free scanner out there?
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Until recently I used Alphatrade for Level II and Microcaptrade for screening and news. My office no longer allows streaming programs, so I can't use them anymore.
I don't know of any good ones that are free. Someone else may be able to help you.
level II shows the number of market makers at each level of bid and ask.
Like if you see a bid x ask of .01 x .02 it doesn't tell the whole story. If you have level 2s, you may see that there are 8 MMs bidding .01 and 1 asking .02, which would imply that there are a lot of people willing to buy at .01 and very few wiling to sell at .02, which is a positive sign. Whereas if the reverse is true, it's a negative indicator.
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posted
book and site recommendations below.. as for books for trading microcaps.. there a a few.. not many but from what i read of them i wasn't impressed.. my best advice is not to trade only pink sheets and such... you can make consistent money in big board stocks then in penny stocks.. only because like 90% or more of pennystocks are scams.. pump and dumps etc.. but like i said you can make consistent money with stocks in NASDAQ, AMEX and NYSE... the big boards... they are more easy to do TA on...
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wsj- Trade with your head and not your heart. Truer words have never been written. Make informed decisions, do your own due dilligance, don't believe it when someone posts a company float is unbelievably small. Call yourself and find out. Most reputable companies are more than happy to give their stock information and if they don't know they will tell you who does. You almost need to become a mini-private eye. Look at all past fileings on edgar, find out everything you can about the CEO and the Board. Look at the charts, they don't always tell you the future but they do a good job of telling you the past, which can be just as important.
Most importantly, do this BEFORE you buy. Don't believe for one second that you are going to miss the big run if you don't buy in that second because you'll probably end up buying at the high of the day and the peak of the pump.
My two cents, and welcome aboard.
-------------------- If ignorance is bliss, why aren't more people happy?
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