Contrary to what all the marketing tell you, Trading penny stocks is NOT the only way to
build your small account.
How i’ve personally done it years ago, is by….
So most new traders, myself included when I first started trading, lean towards trading
small cap penny stocks under the impression that, hey since they’re cheap, I can buy
more shares with my small account and make that lamborghini money quick!
While drinking at the beach or sitting on the toilet.
Well, five years later, I'm not at the beach or sitting on the toilet.
But i do own a lambo, hat!
So I got to the point where I can afford a lambo, hat, by yes trading small cap penny
stocks, but also, trading momentum on large cap and mid cap stocks.
I incorporated trading these two kind of stocks into my trading playbook, so I can adapt to
various market conditions.
Because let’s just face it, there isn’t going to be hot penny stock breakouts every
single week for you to build your small account.
And if i force those trades in slower markets… well i’d lose all the profits from before.
So in this video I’ll go be comparing trading penny stocks versus large cap stocks, the
best set ups in both market caps for people with small accounts to take advantage of,
and the specific market cycles and the months of the year that favor those set ups.
So if you have a small account, but are struggling to find penny stock setups when the market
is slow, and you end up forcing your trades and lose all the profit from the hotter months,
this video is going to help you out!
And all its costing you, is this $5000 DVD.
Just kidding, it's just costing you a simple tap on the like button.
I truly appreciate it.
So let me address the two biggest misconceptions regarding trading large cap stocks right now.
First, trading large caps is like competeing with ivy league graduates, while trading penny
stocks you’re just competing with the dumb money.
And that's partially true statement.
But what most gurus are not telling you is that, when you’re just starting to learn
to trade, and following their alerts and newsletters, you are their dumb money.
So they are selling you the idea that hey its “easier” to trade and make bank in
penny stocks so you should come and join thousands of their
alert followers, which, according to this amazing trader psychology book “Trade the
Trader” by Quint Tatro, those tens and thousands of followers trading small cap stocks, is
the dumb money.
And regarding trading large cap stocks, yes it’s mostly smart money and big money in
comparison to the small caps.
But when institutions, aka the big money, start pouring their funds in and out of a
stock, they leave tons of money trails, and it’s not difficult for us retail traders
to follow the money and the buying or selling volume.
We’ll talk about these large cap set ups for small accounts in a little bit.
Now the second misconception regarding mid caps and large cap stocks is that they are
expensive for small accounts under $5000.
But thats not true at all.
$PCG was a stock in play last week.
They have a market cap of 3Billion so its a mid cap stock.
But it was trading around $6, just like our small cap stock XNET.
And mid cap large cap stocks generally give us a lot of range, especially when they have
catalysts such as earnings and deals.
So let’s take a closer look here.
So $XNET is a small cap blockchain penny stock that was very hot in the past week.
You can see it spiked from $3 to $4.8 at the close on Friday.
And opened at $6 on Monday Oct 28.
So let’s say with a small account you only want to put $3000 exposure into this trade.
And you pick up 500 shares of XNET at the $6 breakout, and you sell into the pop at
$6.30.
So thats a 30 cents a share, which is $150 gain.
For a small account under $5000 thats a very solid profit.
But what a lot of newer traders with a small account cannot handle, is the volatility of
these penny stocks.
When a penny stock price fluctuates from $5.75 to $6 in 3 minutes, then squeeze to $6.80’s
in 5 seconds.
Then drops back down to 5.80 in 2 minutes, its hard not to get emotional watching this
price action when you have your hard earned money on the line.
Whereas if we take a look at Pinterest stock on Friday Nov 1.
The stock gapped down overnight due to disappointing earnings.
So with the same account if we were trading the breakout of this day’s high at 19.8,
which is also an important daily pivot line.
So with 3000 BP you can buy 150 shares of pinterest stock, and you take the stock up
for for 1 point to 20.80.
So the profit would be the same 150.
Yes its the same 150 profit.
But the stock is way less volatile and much less stressful than trading small cap penny
stocks.
The key is that large cap stocks like Pinterest are more likely to form a trend, and stay
in the trend up or down for an extended amount of time.
Of course not all large caps are like pinterest stock here.
But generally speaking, they are way less volatile than small cap penny stocks.
So once you get in long on the dips along this trend, as long as the trend holds, you
can stay in it for 10.
20 or 30 minutes and more.
Its much easier on your emotional health and allows beginner traders to practice patience,
which you need for either trading penny stocks or large cap stocks.
I remember when I started out in 2014, I was pulling my hair out trading these volatile
penny stocks.
I swear I aged like 5 years in 6 months.
I was like, no way man, I don’t want to have to deal with this sort of emotional hurdles
up and down.
If i keep on trading only these trash stocks Im gona start looking like my real age.
What really helped me with growing a small day trading account years ago… is by tapping
the like button at the bottom of this video.
Be careful guys, I’ve gotten some complaints that people are breaking their mouse and phones
doing this.
I really appreciate your support guys but please be gentle with that like button.
So what helped building my small account, is to only trade small cap stocks during the
hot cycles, and while the small caps are slow, i would redirect my focus to the mid caps
and large caps which are trading in much bigger range and volume.
Yes, focusing on one or two penny stock long setups definitely helped, but more importantly,
I only trade and look for these small cap stocks in the market conditions that favor
those set ups.
Why?
Simply said, most beginner traders starting out only have the account size to buy or go
long stocks.
But as i had mentioned in this video on market cycle psychology…
Small cap sentiment rotation happens almost every few weeks.
Some weeks are going to favor the longs, while others favor the sellers.
This year pretty much most of June to September was like that.
We didn’t see much continuation to the upside on day 2 or day 3, and most of the premarket
gappers just sell off right at the open.
And if you were trying to look for long set ups to build your account, well, there wasn’t
that much ideal setups.
In this situation many people would go for sub-par set ups, and chase the one or two
breakouts that looks like it “could” be the turning point for the small ccap market.
What happens next may sound familiar, I’ve certainly done it.
Iused to lose all the profits i made from the hot markets favoring the longs in March
and April, slowly in June to September where everything is selling off.
Like I said, I’ve done that years ago too where Im expecting the same penny stock long
strategies thats worked for a few days to a week, to stay working the entire year.
And that's just not going to happen.
Unless you run a very large chat room with thousands of followers where you could alert
all of them to buy the pump after the half a second internet speed latency.
I mean, that sounds like a pretty smart and solid strategy actually, why isn’t anyone
doing that?
Man I’ve gotta put that 1000% winning strategy into my “How to make lamborghini money DVD”.
So what changed the game for me as a trader, was to adapt.
When I didn’t have shares to short the penny stocks in the market conditions that was against
my long strategies, I started working on trading mid cap and large cap stocks, instead of giving
back all my profits from the months before.
In the mid cap and large cap markets, there's almost always daily fresh news and headlines
that will provide opportunities for us traders.
It could be China tariff news, earnings and guidance , FDA approvals with biotech stocks,
street analyst upgrades downgrades, or deals and agreements between these publicly traded
companies.
As you may have seen in my weekly recap videos posted every Saturday or Sunday, I trade the
small cap pigs such as XNET, CANF, ISEE long and short, and I trade many large cap earnings
gap up and gap downs such as Tesla, BYND, Etsy and Pinterest as well.
Now I know most beginner traders just want fast cash and make fifty thousand dollars
in twenty seconds, but a lot of times, taking 10 minutes to read the earnings and guidance
reports will allow you to form a solid trading plan on these earnings plays.
In large cap trading, you have your volume as a reliable key indicator, and the trend
to follow.
What works really well for me in large cap trading, is trading gap up break outs and
shorting the gap fill.
And yes, while I don't buy breakouts in penny stocks, I don’t hesitate to buy break outs
trading large cap stocks.
The good news is, many of the text book technical setups like the descending triangle, or the
wedge breakout, or the lambo flag formation works really well in large cap stocks.
What im trying to say is, if you want to trade purely based on technical patterns, trading
large caps could be a friendlier choice.
Whereas when trading penny stocks, its much more important to use trader psychology, not
follow the crowd, the alerts, and trade the traders on the other side.
Because if you’re not trading against the dumb money in small cap penny stocks, then
you could be the dumb money.
If you want to know more about trader psychology, make sure to check out these videos.
Stocks like AMD, NIO, SNAP, GRUB are all in a manageable price range for small accounts.
Another benefit is that these mid caps and large caps are much more accessible for small
accounts to short.
If you have a margin account you could pretty much almost always find free or cheap short
borrows on them.
And do not have to worry about not being able to access hard to borrow penny stocks.
I think all in all, traders with a small account should focus on one or two set ups that they’re
really good at, and only them in the cycles and the months that those set ups works best.
If your go to strategy is to buy penny stock gappers, then generally speaking March to
April and October to December are the months that favor that set up.
And maybe in the slower months that doesn't favor your set up, thats the time to paper
trade and practice large cap set ups.
The focus should be to preserve your capital and profit you’ve made already with your
small account, and not to force trades using the same strategy every single day.
If you want to see more of how I trade large cap stock earnings gap up and gap downs, make
sure to check out my weekly recap videos.
I talk about my approach in details there.
And many of those set ups are friendly to build your small account.
And if you have any questions feel free to leave them down below.
And If this video helped you out, please remember to always tap the likely gently for the Youtube
algo.