Welcome back, traders! In today’s blog post, we’ll be diving deeper into the profitability sweet spot of trading stocks between $5 and $10. I want to share some key insights and moments from my episode uploaded to the Warrior Trading YouTube Channel. So, let’s get started!
The Power of Metrics:
In this episode, I emphasized the importance of analyzing my own metrics to identify my strengths as a trader. Through my analysis, I discovered that my profitability predominantly lies in stocks between $5-10 dollars per share. While I do make money under $5 and even under $2 dollars, the sweet spot for me is within this $5-10 range. By understanding our own metrics, we can focus on the stocks that align with our trading strategies and increase our chances of success.
From Uncomfortable to Unstoppable: My Journey as a Profit-Hungry Momentum Trader
Sometimes when I see a stock slowly grind up 100% or more and I miss the whole move, I ask myself how I began the type of trader I am. Initially, I wanted to reduce my exposure risk by avoiding holding stocks overnight. Making consistent profits became my priority, as trading was my sole source of income. As a momentum trader, I focus on quick trades with an average hold time of around five minutes. I also utilize a scalp trading strategy, especially in choppy markets. By taking advantage of recognizable chart patterns, I aim to secure small profits and move on. This strategy has allowed me to capitalize on opportunities and generate consistent income. However, it does at times leave me feeling like I’ve missed the bigger move.
Unveiling the Flaws: Why Penny Stocks Aren’t Worth the Hype:
There are some very clear drawbacks to trading penny stocks. While it may seem enticing to see stocks skyrocketing by 200% or 300% in a single day, there are three key issues to consider. The first is decimalization, where penny stocks trade in spreads greater than one cent. Stocks below $1.00 trade down to the 1/100th of a penny. This makes it challenging to profit from small price movements.
Additionally, penny stocks become extremely thickly traded because so many people buy hundreds of thousands of shares in an attempt to make a profit off a small 3-4 cent move. This creates congested price action.
Third, we have a major issue with halt levels on penny stocks. Stocks that opened the previous day below 75 cents will halt every 15 cents. This means even if it goes all the way from $75 cents to 8.00 a share, if it spikes 15 cents in less than 5 minutes (an easy accomplishment for an $8 stock) it will get halted.
Understanding these flaws can help traders make informed decisions and avoid potential pitfalls.
In Summary
Trading stocks between $5 and $10 has proven to be a profitable sweet spot for many traders, including myself. By analyzing our own metrics, embracing our trading style, and being aware of the drawbacks of penny stocks, we can increase our chances of success in the market. Remember, trading is a journey, and continuous learning and adaptation are key. Stay tuned for more valuable insights and strategies on my YouTube channel, “Warrior Trading.” Happy trading, everyone!