Penny Stocks Trading – Right For You? Volume-1-3

Do you have the right personality to trade penny stocks?

Successfully trading in penny stocks takes the right type of personality. It is important that you can remain levelheaded during both the ups and downs in the stock market. Being able to check your emotions, will help you to make better and more successful trading decisions. So what kind of personality do you have?

Are you impatient and just want help to start investing?

Crisis Managers

Some people are well-equipped to remain calm during crises. They are the ones to step up and take charge during a family or business crisis. It seems that these people are at their best during the crisis. Other people around them look up to them. They think clearly, and seemed to know the best actions for everyone, including themselves. Yet some of these people do quite poorly during good times. It is as though they are waiting for the other shoe to drop. So they manage crises just fine. But for some reason, they don’t know how to manage the good times, especially if those good times are, very good.

These great crisis managers might do really well when their investments stocks are doing poorly. But they might struggle during the good times. And, of course, the purpose of investing in the stock market is to make money and thrive. These crisis managers might still be well-suited for trading penny stocks. They simply need to learn how to crisis-manage their emotions during good times.

The Gambler

There are two main types of gamblers.

The Professional Gambler

There is the professional gambler who has incredible patience. That gambler can sit at poker table and only played two hands in four hours; the remaining hands were thrown in because they had no potential of winning. Similarly during a winning streak, the professional gambler does not get excited. He does not gain the attitude that he is going to win forever. He also knows that this winning streak is not a time to make up for losses. It is simply a temporary experience. Therefore, he remains calm and patient during both wins and losses. He remains professionally stable. This individual is well-suited to trading penny stocks if he chooses. He has the patience and the emotional stability to make sound decisions.

The Amateur Gambler

The amateur gambler, on the other hand, might not have the emotional stability to make sound decisions when it comes to penny stock trading.

This gambler might be a professional in training. In which case, experience will mold this gambler into a potentially successful penny stock trader if he chooses. On the other hand, if this amateur gambler is in the category of just plain excitable, he will probably never be a successful penny stock trader. If he is the type of person to get depressed when things are down, he might end up making decisions out of a place of desperation. These types of decisions almost always end up creating more losses. Likewise, if he becomes euphoric during the good times, he likely will make equally poor decisions. This type of personality will likely land him in gamblers anonymous long before he can become a successful penny stock trader.

The Completely Risk Adverse

There are two primary groups of people who are completely risk adverse.

The No-Money People

The no-money people simply do not have any excess money. They do not have any money that they can lose. They are living paycheck to paycheck. They have nothing left over after paying all the bills on a monthly basis.

Sometimes, these people fall into the trap of borrowing money in order to invest in penny stocks. They know that they need money in order to make money. And they think all they need to do is obtain the money somehow and that the investment strategies will bring them into the black.

In fact, some salesmen will approach people who have no money with the following line:

If you want to get ahead, you will do whatever it takes in order to become an investor. This would include using other people’s money in order to invest. Then the salesman will further explain that in this case other people’s money is the persons credit cards. The salesman will go on to explain to these people, without money, that the interest that they will incur on the credit cards will be a business write-off.

It is my opinion that these salesmen are being unethical. They are in a position of authority and have gained the trust of these people, only to lead them down a very dangerous path.

If you cannot afford to lose the money, you should not invest in penny stocks. You should never borrow money in order to trade or invest in any way. Investing in the stock market, whether it be in penny stocks or otherwise, is never 100% guaranteed. There are operating expenses as well as the possibility of losing, at least, part of your investment.

It is true that you can put safeguards in place so that you do not lose everything. But you can never be guaranteed to not lose anything. Therefore, in order to invest or trade in penny stocks, a person must have some tolerance for risk. The person with no money has no tolerance for risk. Therefore, the person with no money should not invest in or trade penny stocks.

The Money That Cannot Be Lost People

There are also people who have a complete intolerance for risk adversity even though they do have some money. This group can be broken down into three categories as well. The first category within this group is that too close to retirement group of people. This group of people cannot risk very much of their nest egg. This group might be able to set aside a small amount of money, a very small percentage of their savings, to invest in penny stocks. However, they cannot risk very much of their money because they are too close to retirement to make up for large losses.

The second category of people who are intolerant of risk adversity even though they have money are people that have other special needs for which they need to earmark the money in savings.

The third category of people who are intolerant of risk adversity even though they have money are people who simply cannot tolerate the stress of the unknown. These people would risk their health if they were to trading penny stocks. They would risk increased headaches, developing an ulcer, or having a rash spread all over their bodies. The possible gains that they could get in trading penny stocks would be paid out to Dr. bills. Obviously, that would not be a good trade.

In Conclusion

Trading penny stocks is not for everyone. It is important to understand yourself and to know your own personality. There are numerous investment strategies available. Therefore, it is not necessary for any investor to override his own personality in order to invest.

Successfully trading in penny stocks takes the right kind of personality. These people not only need to have money but also to have money that they can tolerate to lose. Successful trading requires that the investors be able to remain levelheaded during both the ups and downs that are inevitable. To have the best chance of succeeding, penny stock investors need to be able to control their actions and decisions despite their emotions.

So do you have what it takes to be a penny stock investor?