The Penny Stocks Success Factor

I've been involved with penny stocks for over 20 years now, and have provided opinions and guidance for more than 15 of those years.  During that time, I was always very interested in the trading results that my subscribers enjoyed, and I did what I could to increase their odds of success.

Sometimes I would make a bad call, perhaps the market would turn strongly against me, or unforeseen events would derail my latest penny stock pick.  It was always interesting for me to see, at times like those, that some of the subscribers to my penny stocks website still turned a profit trading those bad calls.

What was even more intriguing was when I'd hear about people losing their investment dollars, during times when I had made the right call.  I'd find an undiscovered, up and coming penny stock, then profile it to subscribers before the rest of the investment community heard about it.  We'd watch as the shares turned from penny stocks into small cap stocks.  Subscribers would be elated, sing praise from the rooftops, and tell their friends about our little website.

Then we'd get a curious e-mail expressing a person's frustration, as they had lost money despite the fact that the shares tripled.  Needless to say, this was very surprising to me, and even more confusing.

At first I assumed that the ones losing money on winning penny stock picks were simply bad and erratic traders, with little patience.  Likewise, I'd assume the people making money on the penny stocks heading south were phenomenal investors, raking in every 10% upward bounce as the shares fell.

This may be partially true, of course.  However, the more experience I've gained, the more I see clearly that two investors will have significantly different results from the exact same penny stock over the exact same timeframe.

A penny stock that doubles in price may help one person double their money, while another breaks even, or even loses capital.  This applies also on penny stocks that drop half their value, where some traders actually find a way to profit.

What is it about different investors that open up the door for such different results for them? I'm not about to suggest that I fully understand it myself, but I do see that better investors find ways to turn lemons into lemonade. 

They do this by waiting on shares to dip, rather than buying up to the asking price.  They invest large enough position sizes to make the impact of commissions almost negligible.  They don't sell out their shares on every scary dip, and they don't take profits on every impressive upward opportunity.

Overall, they are just better investors.  They observe the tenants of great trading that I've always preached to my following of penny stock enthusiasts - patience, research, experience, and focus, among others.

It's like the old saying that in the winter some people freeze to death, while others go skiing.

The best way to describe the situation is to think of  NFL quarterbacks.  A great QB can take a great team to the Super Bowl.  That same great QB can help the leagues worst team win a few games. 

However, put a really bad QB on a great team, and they'll lose.  Put that QB on the worst team and they'll certainly lose.

Great investors are like great Quarterbacks - they find a way to win.  Bad investors are like bad Quarterbacks - they find a way to lose.