Buy and hold is not a strategy for the OTCBB, given that people take profit and enter/exit plays at different levels it is very important to proftect your portfolio and take profit.
Think about how things go up and down, and why:
MMs want to create volume so they can make their commission, and an important concept to keep in mind is that there is usually a lot of volume near the top of channel, and near the bottom of channel.
Once you have been trading for a while, and you have followed one ticker, you can get the sense of what I mean. This channel may take a couple months but its clear. Its oversold, bottom feeders come in and drive it up, runs and news hits, peaks out and gets beaten back down. Rinse and repeat.
This ticker clearly is in a channel, and you can see especially with the Price by Volume indicator at left (the red and gray bars) that most of the volume is from .0021 to .0028. This is currently trading in a very nice, predictable and profitable trading channel.
What do people mean when they talk about "Beer Money" or "Lunch Money"?
This one is a classic:
This is a pretty simple concept. The above poster is attempting to persuade you to hold rather than sell, even though you are up 2-3 ticks and potentially 20-30%.
Or, they are describing a trader who presumably bought at .0005 and sold at .0007 Can you imagine that? Who would be foolish enough to do that???
In reality, how much money is "Beer Money?"
Ok, lets do a thought exercise.
Assuming an initial buy of $750 plus 6.95 commission $756.95 at .0005 you get 1.5 Million shares.
You then sell them all at .0007 for $1050 minus 6.95 commission, = $1043.05
You started with $756.95 and turned it into $1043.05 for a $286.10 profit. That is some serious beer money
People always complain about 1 and 2 tick flippers, when in reality they are making $100-$300 per trade. That's some serious beer money. More like cognac money?
Smart "Beer Money" traders never regret it, because they have protected their portfolio.
PUMPER BS LINES:
Here are some of the common lines you will hear from a pumper, or someone who is overly enthusiastic. Most of the time its pure BS and they just want you to hold your shares so they can sell higher and dump on you. Often times when a ticker is being loaded it is very very quiet, and when it is being dumped you will hear all the pumping in the world. For example, OTC Knight on IHUB is one of the worst -
Some of the BS pumper lines I hate:
POSITION IN THE CHANNEL - Top of channel it sucks, bottom of channel I love it.
"Grab cheapies before news hits" - First of all, the term "cheapies" is pretty damn annoying, but beyond that you need to remember that companies release news so that debt holders can SELL INTO RETAIL BUYING PRESSURE.
Remember, -- You are not the only one waiting for news, VFIN VNDM BMAK CFGN and all those jerks are also waiting.
"Im not selling anything under .01" - When in reality this BS pumper has several limit sell orders in and he is probably selling right now while you are slapping.
"Moves on Air" - This is true, but usually describes a ticker with a huge gap and no liquidity. Its moving on air because there is no volume base for you to analyze and determine proper entry.
"MM's playing games" - MM's dont play games, they create volume, dump and accumulate shares. The only ones playing games are pump and dump artists.
"To the moon" - No explanation needed. because we are smart traders and take profit, and do not hold hoping we make it to the moon.
"Better buy now because you might miss the run" - This is the worst reason in the world to buy. There is always another ticker to play, and who cares if you miss the run. OTC is hot, go find a better ticker and quietly load it.
"this is going to no bid" - Worst offender in the world is a guy on IHUB named PSTATS. A shameless trader/basher who claims every ticker is going to .0001 and he is bidding there. The reality is each ticker trades in a channel, and while some are going to .0001/no bid, most others will test and bounce off support levels.
"this is the biggest scam on the OTC" - Dumb bashers dont realize that the biggest and worst scams on the OTC are also often the most liquid and profitable plays, but we wont tell them :)
I hope everyone enjoyed this article, the most important thing to remember is that most tickers trade in a channel and taking profit is lesson #1
READ MORE ARTICLES - CHEDSBLOG HOME