Penny stocks in the stock market today: Trading penny stocks isn’t a random game of chance, but a wager of probability

Penny-StocksIf you’re flipping a penny, there’s a 50/50 chance it will land with heads facing up and a 50/50 chance tails will be facing up. If I were betting against you – heads I win a dollar, tails you win a dollar, after several rounds neither of us would’ve won or lost any money.

Now imagine you have a loaded penny. For every 100 throws, heads is up 47 times and tails is up 53 times.  This is the closest thing in the world to being able to legally print your own money. If you bet on tails forever, you’ll eventually win all my money and anyone else’s who bet against you.

Trading systems are designed to give you a “loaded penny”. An advantage based on probability. An outcome that is more likely to happen than not. Any trading system, whether you use pattern breakouts, trend-following, Fibonacci, moving averages, channel following, oscillator signals, Bollinger bands, swing trading or  opening gaps, you are depending on that “loaded penny”. It’s a trading strategies based on the logic of “when THIS happens… THAT usually follows.” Sometimes it doesn’t, more often it does. Adopt a system that can help you identify high probability trades, enter them correctly, and protect yourself while allowing your profits to grow.

Sure, some trading systems are better than others. But don’t get preoccupied with finding the “perfect system”… that elusive pot of gold at the end of the rainbow that guarantees profit and never, ever gets it wrong. Be realistic with your expectations and find a trading system that you understand and feel comfortable with. Then stick with it and be consistent.

Any average system will make money for a trader that’s cool, collected and under control. But an anxious trader who is inconsistent or easily spooked will make the most brilliant system fall apart. All traders have good days and bad days when it comes to making money. Many days will close with small profits and many with small losses. Then one or two days a month you’ll make a really big profit. That’s how you make money trading.

Even with our “Loaded Penny” trading system, you never know when the big trades are about to happen. The one time you don’t take the trade is exactly the time the market takes off and never looks back. It can happen to anyone. That’s why it’s imperative that you see the bigger picture. The current trade is insignificant because it’s only one of many. It’s merely a single star among thousands in a huge galaxy. It’s more important to manage your risk, and then surrender yourself to the Universal Law of Probability.


About the Author

Gregory Peters financial reporter NYSE post. Authors have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This article is for information purposes only, and is neither a solicitation or recommendation to buy nor an offer to sell securities. *NYSE Post does not set price targets on securities. Never invest into a stock discussed on this website unless you can afford to lose your entire investment.