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 you how I finally figured this out.
When I was in my twenties, I thought the best investment approach was to “play it safe.” 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 the most experts were most highly recommending stocks. I thought this was a foolproof 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. I learned much of this while sitting in the coffee shop of a bookstore that had a very nice selection of financial books. I knew all about things like P/E ratios and how to do technical analysis. I was definitely making a better profit than I did before. However, given the effort I was putting into it, I was still not making enough money for an hour to be really excited about the results.
There were periods in my thirties where I lost interest in the stock market because I couldn’t make enough profit. However, I maintained at least a minimal portfolio, and I also went 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.
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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 who understood which technologies were going to break open, and I tried to apply this special knowledge to the selection of stocks. I actually made some decent 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 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, those stocks’ prices 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 fortunate people who got in on an IPO, and then as soon as the stock went public, they became instant millionaires overnight. 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.
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 during my thirties. I was very hesitant to jump in, though, because I had always heard that trading penny stocks were 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 foray into trading penny stocks was fascinating, with mixed results. I had no idea what I was doing, but I would make an incredible profit percentage-wise that would send me on highs as I had never known before from trading from time to time. 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 than I ever had traded 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.