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Fear, Greed and Hope – Watchlist for Tuesday March 1st 2011

Posted on March 1, 2011 by Penny Stocks Picker

If you ever want to become a better stock trader than you must not trade based on emotions.  Trading on emotions will cause you to make the worst decisions.  Hopefully you have read some of my educational  articles and have some basic understanding of my trading strategy and what to look for when investigating, initiating and closing a trade.

Let’s briefly discuss the traits of three types of emotional trades and how to avoid some pitfalls:

The Fearful Trader:  This trader hasn’t done enough research to really understand why a particular stock is on the move or why it could become the next hot penny stock.  Ultimately this lazy trader  (McFly) is looking for a get rich quick stock tip.  As such, McFly is like a deer in the headlights when the time to initiate a penny stock trade has arrived.   Because McFly has no self determined valid reason to initiate a trade, he sits on the sidelines watching the next hot stock begin to move up.  Later in the day, the stock pulls back to a support zone and then makes another large move up, but McFly is thinking it’s to late to get in now and still continues to watch.  The hot stock party continues as the stock moves to the high of the day.  Finally, fearful McFly can’t stand being left out and jumps in at the top.  Guess what, McFly is most likely going to get hosed again.  A Bold and Fearless trader would have remained calm, have the ability to make quick methodical decisions and be well prepared by having a complete entry (i.e. bought on a pull back) and exit plan (i.e. buying volume turns into selling).  The Fearless trader would have  had a number of tools available and at least understood share structure, technical indicators such as support/resistance zones, potential for dilution, news, what is driving the Hype (Pump), who the market participant are (i.e day traders), level II data (volume, time and sales) and so on.  You must  be  BOLD and FEARLESS by having as much  information as possible.  All available resources will assits you in your evaluation to either avoid the stock or provide you with a valid reason to initiate the trade at the correct time.  The Fearless trader also knows when to admit when they are wrong and isn’t scared to take a small loss before it becomes a bigger one.

The Greedy Trader:  This trader is never satisfied and believes that the stock is going to continue to move up  or doesn’t want to miss out on further gains.  Greedy fearful Mcfly happened to grow a set one day and  got lucky by  jumping in on a hot pump stock tip.  McFly only put in about $100.00 (because he is still fearful) and the stock happens to go up 100% in a short time.  But, McFly isn’t satisfied with only $100.00 profit because he wants more and it’s just not worth his time.  Well, it is possible that the stock will continue on up (maybe even 1000%).  So, McFly continues to wait but the stock pulls back and is only now up 50% near the close of the day.  McFly is pissed and doesn’t close the position.  After a few trading days, the hot stock turns into a stinky dried shriveled up old raisin and is now trading at loss.  McFly grows disheartened and lets the stock grow dust cluttering  his trading account with another worthless turd to add to his collection.  The GRACIOUS and FEARLESS trader would have been confident in his initial decision, put in a bit more money and began selling his position as the stock moved up. When the stock was up 100% he could have sold half his position so that he took some profits and remained in the game as it continued to move up or reduce his risk.  It’s easier to make $100.00 ten time then $1000.00 one time.

The Hopeful Trader:  This trader is pathetic, just doesn’t think or have any plan….he just hopes.  Hopeful Joe buys into any piece of hype, believes everything he reads is true and that others are honest.  Joe never admits when he is wrong, drinks the koolaid, smokes the catnip and thinks everything will work out.  Hopeful Joe is going to end up with a small fortune…….pocket change.  There is no hope when it comes to trading penny stocks, it is or it isn’t.  When it comes to penny stock trading, don’t trust anyone, believe nothing and be pessimistic.

Some Stocks to Watch Tuesday:

EYSM, SSHS, PFNO, CWRN and AMEL