Let me first start with this little tidbit of info for you, I have tried it all early in my career, swing trading, stock promo trading, penny stock trading, investing, sub-penny stock trading just about all of it, expect for options and short selling (which I plan on doing later in my career).

After using all of the services online to get an edge in trading a found that, well

, for lack of a better term, “scalping” is my best and most profitable way to trade. I can’t really stand tying up my capital for more then one hour (it’s like a nervous tick), I would rather take the small $20 $50 and $100 trades vs. trying to shoot for the moon. I also trade alot on Gut Instict.

This works for me, but it may not work for you, I scan stocks that I feel are about to breakout, as I prefer to long a stock then short it (which I have yet to do). I base most of my trades on key price areas and if the volume comes in on those areas.

I am going to keep some things a mystery, as I feel my strategy is a good one, and someday with be worth paying for but I will detail a trade below, so you can get an idea of what I am doing, so you can make better, more informed traded for yourself.

MY TRADING STRATEGY

(Simple Version)

Focus on Liquid Stocks under $20

Only Trade Hot Sectors/Stocks

Play Breakouts only with Volume

Plan Enter & Exit Before Trade

Risk/Reward at least 2:1

Plan Trades the Night Before (Scan)

Set Tight Stops on Margin Trades ($100 Max Loss)

Take Profits Take Profits Take Profits!!

(Complex Version W/ Example Trade)

 Keeping in mind all of the above criteria, lets say you have a stock that is close to breakout and you have everything setup and ready to take a position in the stock (everything in this scenario is going to be perfect, for strategy sake)

So stock $XYZ is at $2.98 and the breakout is over $3.00 you can play this one of two ways based on the chart.

#1 buy it now on the breakout anticipation with a tight stop around $2.93

OR

#2 wait for confirmation of volume and the $3 breakout

This choice can make a big difference based on the price action and chart that has proceeded it, in most cases the ladder is the best option as it will be a true breakout with nearly for sure gains, vs potentially getting stopped out. How do I decide???? Gut instinct, if everything feels right for situation #1 then I pull the trigger, but most likely on a slight dip or some weakness at the right moment.

Ideally, I like to trade sizes that make it easy to tell profit and loss amounts IE 500, 1000, 2000, 5000 shares. It makes it easy to know that each penny up or down is = to $5, $10, $20 & $50 respectively.

Once You Are In The Position

Now you own the stock, emotions can run and you must be able to make logical decisions at this point, now, depending on position size and the actual stock you are trading, the price and the power of the breakout many factors come into play.

I like to avoid commissions as much as I can, but profit as much as I can at the same time, so I usually scale out either by thirds or by halves. I prefer thirds, as if it really rips, I keep that last third as the home run shares.

 Example of Scaling Out of a Position

Alright so you bought 2000 Shares of $XYZ at $3.00 on the breakout, which is very strong with volume, on your chart you should have the following indicators setup on the 1, 2 & 5 minute basis. 9EMA 13EMA 20EMA and volume with color.

I like to take quick profits so I shoot for $50 with 1k shares, $100 with 2k shares and $200 on 5k shares on the first scale out unless the stock is pushing hard i shoot for these amounts.

So with 2,000 shares of $XYZ I sell off 1,000 around $3.05 for $50 profit fast

Next, I will sell off 500 or the rest based on the moving averages and the volume (also my gut feeling on where its going). So I take off 500 more at $3.10 for another $50 profit, or All of it, based on the action.

Finally, If I didn’t close my whole position out, and still have 500 shares left, I will let it ride with a stop set at my first sell point, which is $3.05 for basically a free trade and if I get stopped still an additional $25 profit.

In conclusion, if this goes correct, I won’t sell off that last 500 until the EMA’s all cross over each other so that profit is always TBD. But if you get stopped, you still made $125 on the trade..Not bad in my eyes!!!

Hopefully this helps you out, or at least was somewhat informative.