[FREE VIDEO LESSON] Rules for Trading Low Quality "Junk" Stocks

[FREE VIDEO LESSON] Rules for Trading Low Quality "Junk" Stocks

As you've seen we've had some really hot runners the last few days. We haven't had too many low float names break out back to back or for multiple days for that matter but it's always nice to see the opportunities comes back.

Some traders, just won't long them. Understandably. They're all junk and never end well. But, there are two sides to the trade to be had. I think it goes without saying - you need to use extreme caution. Typically in the room I am a broken record to new traders because it's a great way to double your account or break your account (in half or the entire thing for that matter).

So in some markets I will trade these things, often times I end up getting caught at least on one of them but overall I'm happy I traded them. These types of trades can create a lot of bad habits especially for new traders. Decisions they make work on THIS ONE, but 90% of the time it's a very bad trade or very bad idea to chase. That confirmation and/or reward for a typically bad trade and reaffirm this as a GOOD idea and a GOOD trade. Personally I have to remind myself before I get too amped up on the next trade that it's rare and make sure that all the check boxes are marked -- otherwise avoid the next trade.

For example, was buying MBOT at $10.50-11-12 today smart when it was just $2 today? or $7-8-9 pre market? Eh, normally? Probably a bad idea, but intuition told me shorts were screwed and it was worth the risk for the potential squeeze out. Risk? Very high. What comes with high risk? Very high reward (or very high chance of fail). So, if I nailed the morning move for that near 50% move how do I keep myself in check the rest of the day?

Same thing on SAEX a few days back I posted a chart that could have worked but in most cases may not have. Well, I was rewarded for it, my intuition proved to be correct and nailed the $1.50-1.80 + move into the close. Well, what happened the next day? Yep, I didn't check in on my dial I had a very nice win going mostly unrealized gains and watched them quickly diminish after ignoring a few key tells that I discuss on the video.

Hope this helps when trading low quality names. Keep in mind that the MAJORITY of your trades in your career do not come from these types of names. They are not as scalable as an AMD / CGC / BAC or 'real' name is but when the market does heat up I can't help myself but dabble a bit.

3 Comments

  1. You are a class act man.

    Reply
  2. Good post. Thanks Nate

    Reply
  3. Great stuff!

    Reply

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