I’ve been trading for more than 20 years and I’m going to share with you my biggest secret to making money with stocks. This technique is so simple, I could literally teach a 10 year old to do it and they’d be making good money with stocks in no time. Before I share my secret with you though, I want to tell how I finally figured this out.
When I was in my twenties, I thought the best approach to investing was to “play it safe.” So, initially I bought only “safe stocks” that had been recommended publicly by expert stock analysts. Mind you, I did my homework and spent a great deal of time reading and watching financial shows to determine which stocks were being most highly recommended by the most experts. I thought this was a fool proof plan (it was better than going to a traditional broker which I learned very early on was a big mistake). I also met a few well-intentioned older investors who tried to take me under their wing but I kept seeing the stock market kick them where it hurts too so I can’t see I fully respected their advice. Over those early years of trying really hard to make money with stocks, I averaged a significant gain but nothing spectacular and certainly not enough to keep me excited about investing in the stock market.
By the time I hit my thirties, I had self-taught myself how to analyze stocks. Much of this I learned while sitting in the coffee shop of a bookstore that had a very nice selection of financial books. I knew all about about things like P/E ratios and how to do technical analysis. I was definitely making a better profit than I did before but given the amount of effort I was putting into it, hour for hour, I was still not making enough money for me to be really excited about the results.
There were periods in my thirties where I lost interest in the stock market because I just wasn’t making enough profit. However, I did maintain at least a minimal portfolio and I did also go through periods when I would trade much more actively. I’d happen to hear about a great stock and that would get me excited but my enthusiasm would eventually wear off when the profits from these over hyped stocks would turn out to be lackluster.
I’ll also admit that the heyday of the tech bubble got me excited about stock trading more than once as I love all things tech. I also had several geeky friends at the time that understood which technologies were going to break open and I tried to apply this special knowledge to the selection of the stocks. I actually made some descent money doing this and I was also lucky enough to get out of my NASDAQ tech stocks in time before everything totally crashed. I saw stocks that had been trading for more than $100 a share fall very quickly into the penny stock range.
During most of my thirties, I was still in the mindset that it was safer to buy well known stocks on NASDAQ or NYSE. However, the prices of those stocks during were so high, it was difficult to accumulate many shares of anything unless you were willing to sink many thousands into the stock market. I was not willing to do this because frankly I had never seen enough profit to get me all that jazzed about doing so.
I also went through a period of IPO longing during the tech bubble. I kept hearing about these incredibly lucky people who got in on an IPO and then as soon as the stock went public they became instant millionaires over night. A friend of mine and I spent a great deal of time trying to figure out how we could get in on this IPO action, so much time in fact I’m actually embarrassed to say how much. It was all wasted time in the end (although I did enjoy collaborating with my friend) as we never did strike it rich with an IPO because we could never get in on one.
During my thirties, I would occasionally hear about a really cool tech start-up trading in the penny stock range OTC (the bulletin boards) or on the pink sheets. I was very hesitant to jump in though because I had always heard that trading penny stocks was just too risky. However, I began to take notice of the incredible gains these little stocks made. I saw several make 1000%+ jumps. Eventually, I couldn’t resist them any longer and I began to dabble in penny stocks.
My initial forray into trading penny stocks was very interesting with mixed results. I had no idea what I was doing but from time to time, I would make an incredible profit percentage wise that would send me on highs like I had never known before from trading. However, it was never actually that much money because I refused to invest anything more than a few hundred bucks. This was probably good at that time because I also lost money on some penny stocks too. Overall, I did make money. In fact, overall I made more profit from penny stocks that I ever had trading the “safer stocks.” I was also definitely learning and I was figuring out that if you want to make a lot of money in the stock market, especially in a short amount of time, trading penny stocks is the best way to go about it.