penny stocks are gambling

Penny Stock Gambler

Penny Stocks Gambler

The Kenny Rogers song “The Gambler” is extremely accurate when it comes to penny stocks and the OTC market.  If you are going to learn to play the game you better learn to play it right.

Almost all of the Otc market and penny stocks move on hype. Market awareness and promotion influence whether these stocks move up or down. If you look at the five year chartsmost penny stocks they have moved down big time. Penny Stocks are like playing slot machines some win big but if you stay at the machine too long you will lose all of your money.

We are all going to get rich!

Penny Stocks hold a lot of the same psychology as Ponzi Schemes as well as multi-level marketing. You will see a bunch of people spreading the word and pumping stocks that they own shares of trying to influence others to buy. The companies are almost always overpriced and most of the people pumping the stocks are simply regurgitating information that was pumped and passed on to them. This creates a rippling effect especially if the stock has forward momentum.

Shun the Unbeliever!

Penny Stock pumps fulfill some basic humans psychological needs. Ordinary people get to feel important and part of a group. Most people end up losing sight of why they first got involved in penny stocks, which was to make money. They trade that goal in, for a sense of community and team. People convince themselves that they actually believe in these junk companies. They tell their friends and family about them too. These beliefs are solidified when someone oppose them. Opposition is quickly labeled Bashing or Shorting. Almost all belief structures are strengthen when there is a perceived bad guy or enemy.  Religious people have the devil, Americans have Isis, and Penny Stock Believers have Shorters and Bashers.

There will be winners and losers in every stock

In every stock there will be winners and losers. There are two type of winners, Those who got lucky, and those that have learned from their losses and mistakes. If you are new to stocks and you have been making money consider yourself to be lucky. Too many times new investors will get lucky and develop a huge ego. They will think they developed some secret system for picking the correct penny stocks. Their luck is almost always short lived. They will get crushed in the market. My first year investing in the OTC market I turned 9k into 180k in 4 months. Then I received a huge blessing in disguise. I invested in a stock and let my ego get the best of me and lost 100k in three months.  At the time this sucked but it was a great learning lesson. It is important to have the mindset that every time you lose on a stock that you can learn from it. Failures make up the build blocks to success.

Every Penny Stock is a scam

One of the best tips I can give beginners is to look at every penny stock as a scam. Put yourself in the shoes of the scammer. If you had tons of shares to sell how would you keep people excited? If you had an unlimited number of shares and the only way to make money was to keep people buying; What stories would you tell? What chart patterns would you intentionally setup? What news would you sell on? How would you get people excited? If you look at penny stocks this way you will start to see that they become a lot more predictable.

K.I.S.S.

In closing I want to leave you with some very simple tips.

  • You won’t go broke taking profits
  • Focus on making money and let others foolishly believe in these companies
  • Buy Low and Sell High
  • Cut losses early if a trade is not going your way
  • Be patient when choosing where to enter a stock and don’t chase
  • Avoid trading on emotion while understanding the emotions of others
  • Don’t get too greedy
  • Learn to read Level 2 and SEC filings or you will lose money

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