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Created: 12/07/2005 10:28:07 PM - Followers: 44 - Board type: Premium - Posts Today: 0

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The 3 P's of Investing and the Strategy that can maximize your ROI.

* Principle

* Profit

* Potential

Investing and trading in the pennies is based on one's ability to fully understand what he/she has and when to sell.

Penny companies and the arena they trade in are the most unpredictable and have left investors/traders with losses that with a smart strategy, could have been avoided.

Emotion,Anxiety and Greed,three of the prevailing sentiments that always seem to be the guiding force on investors as when to buy and sell,only to acknowledge it is discipline that will pave your road to a successful ROI.

I'm only discussing the unpredictable and unregulated market,known as the pinksheets...Here the Market Makers and not the investor have the total control and you as the investor must learn to either stay one step ahead or fall victim as most usually do.

When you trade in this market you first must at the earliest opportunity to remove your Principle..

The best way to assess this part is divide your total share account into 3 parts..The first 33% is your Principle,the second 33% is your Profit and the remaining is your Potential.

We have all experienced nice runs only to find your issue floundering at the bottom never to return..It is this first run that one should remove the Principle investment..This should always be applied and under No circumstances should you deviate from this..If you feel that the issue warrants a second run,it is your Profit that will be your next exit..Remember,if you removed your Principle investment you will have taken a huge risk out of the market and your Emotions will become less of a factor..

Potential...The last of the 3 P's is the most difficult and should only be left as an investment if the company has a business model that can generate revenue,but most importantly, can ROI based on the forward fundamentals of the company be realized..One assessment that you must take into account is the share structure verses Market Cap..It is this one and very much overlooked part that will determine the true value and fair value with respect to share price and where it will eventually go..

In the penny arcade,most participants/investors are way over their heads and have a skewed impression what really comprises what is an investment and what is a crap shoot.. From what I have seen in this cesspool of penny garbage, it's all in the timing and being able to stay one step ahead of the market markers and the loansharks...There is no such term as long-term, investment grade, great buy and all the other misnomers that many like to refer to these pennies.. For what it's worth, they are all junk and the only money makers are your day traders and the loansharks that feed offshore on what gullible buyers throw their way and the market makers who execute these buy and sells...

When one comes to the pennyarcade, he/she comes with the idea to make money, but only to be let down.. The understanding of how pennies work is in itself an art and science and not the fact that a stock is priced at .0002, .001 or .10 or whatever, and it should go up because it's so cheap...Most investors if you can call them that in pennies, get the 3rd degree and they lack the sensible approach of admittance that they made a mistake and can't accept their loss..

Since the great tech and birth of the computer, the potential of online trading took off and everybody with a computer thought that the penny arcade was going to make them wealthy.. This has become so far from the truth and 15 years later many have lost thousands and still can't figure it out...

It's simple,98% of all pennies are losers and just plain junk.. Many or most penny companies will have movement beyond a certain entry, but all will without a doubt fall like a rock and flounder at the bottom for years with ever moving north again.. If you hear nonsense like "wait until next year", or "put it in your sock drawer" and there are dozens of brilliant ideas only to have you looking back on why did I pay attention to all those clowns on the message boards..

It doesn't matter on how much DD or other research you do on a particular penny stock, because these companies don't have a future.. It is the art and science of understanding the way market makers play and until you get a grasp at their non-rules and cheating ways, you will lose..

The idea of holding any company is and should be based on free shares after the Principle has been recouped.. This part is the Potential of the 3 P's..Does the company have a future?

First, when a company promotes itself on penny exchange, it is for funding their R/D and this is especially true with BIO and Tech companies.. Once a company can establish that even their product/idea has legs, it isn't the shareholders that gain, but the owners and the largest preferred shareholders.. We as shareholders gain in the cycle of share price movements over a period of time, which allows us to sell on news and reap a decent reward, not hold out in hopes...It is pure nonsense and just doesn't make for an explanation that hold long-term on any penny stock, without exceptions can ever be achieved..

To explain this further.. When a company goes public, it is mostly for funding their R&D programs through stock sales by market makers and picked up by us, blah blah, you get the point.. Once a company has perfected their technology or product, it will usually in most cases shop around for a buyer for their tech/product or merge as a division into a larger company or outright hostile type takeover, again this is very true within the Bio companies.. Companies with large O/S and huge amount in authorized shares generally don't have a problem with hostile takeover practices.

Through this whole ordeal, the company continues to sell shares until it has ballooned their O/S and depleted their authorized shares so much, they are forced to do the most drastic of all moves, a R/S.. All this time they continue saying and moving ahead and convincing us their R/D is on target.. But Then, they announce a R/S, because they feel to stay in operation is a must and probably so, since they haven't found a partner and they are short of funds and we are, or some of us reluctantly go along.. Posters always use the argument that if the company doesn't split it will go out of business and we will not have anything and should be loyal and stick it out.. Loyal!! That's a new one.. Now this is just plain incorrect and management knows this and will be able to keep going with or without a R/S.. Remember the offshore loansharks? Most companies go for these same culprits and is at this moment diluting the pool as we speak with most pennies.. When management and I must say are in general a bunch of sharks that have a printing press for their own benefit and will do everything to keep the printing of new securities going just to fatten their own greed. Management is up against the wall when they parley their shares and this is always a last attempt and absolutely a death sentence, like the R/S. Incidentally, a R/S approved by shareholders is a formality and will always get approval regardless how we as shareholders vote.. This part is always stacked against us.. Of course in certain cases we may be able to thwart a R/S, but that is rare..

In case of any BIO company, they usually disappear into a much larger concern. .Healthcare companies that trade on the penny exchange rarely ever become stand alone concerns.. The R/D and marketing requirements is far to great for any startup to absorb and is too costly, so they usually and that is if the product is all that is meant to be, will be acquired.. In general if a Tech company has a promising product they too will be looking for a buyer, because the tech field is changing so fast that the smaller concerns lack the funding just to stay in the game and will never be able to compete with a much larger firm that have the cash and know how.

Bio companies who have products that can even meet FDA approval will probably be sold or a major PHarma company will become a partner as in a collaboration partner and they absorb or become merger.. Now to get to this stage will be with countless rewards towards shareholders equity, but eventually it will become an entity of whomever becomes a partner.. This is in most cases the way of a startup Bio company with excellent potential....

You as a shareholder will get the most out of a Bio company on the penny exchange than any other company.. The rewards are so great in Bio as well as the tedious long wait and this may require patience that will take years to develop, but eventually if the company has the fountain of youth medicine can make you a wealthy investor, in return on your principle.. Also keep in mind, that the risk is also the greatest threat to a dismal demise of your investment dollar. The latter is more accurate than the success rate..

A Bio company that can hopefully get the FDA seal will give the company the real interest and the potential share price explosion within hours of such a PR, but that will only come with the approval.. The timeline for a nay or yah on acceptance is rather short on devices than the lengthy clinical trials required for drugs and a device, which not actually being a drug could come sooner then think.. So a 6-8 years for even a drug going to trials can certainly be overshadowed with impatience and will keep a stock price from ever achieving the result in the near-term or even pan out all together.. The movement on the stock price with these companies comes with the interval press releases which allow you some trading with potential profit.

So in Short..Trade penny stocks do not use these issues as investment grade..If you have one and believe me they are rare,remove your first two P'3 of Investing and Strategy and fully understand the true Potential of the company that you wish to hold long..

Have a good day
Varok

Everything on this site is Copyright (c) 2000-2009 by KVR/Varok. This material may be distributed only with proper credit to and must include the Author.. Distribution of substantively modified versions of this document is prohibited without the explicit permission of the copyright holder.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Market makers control the action on the penny arcade not shareholders..

Is there really manipulation by market markers?

Manipulation by Market Makers is an really an overstated term that carries feelings of exploitation and down right fraud, but in reality, Market Makers are not companies that appear like one night stands and then disappear, quite the contrary.. Market Makers are responsible to make a market and to meet the needs of those they are responsible for, companies, shareholders and institutions and it is to these entities where they may try to influence the best market executions.

If the Market Maker was to keep the price steady on the release of news they would find themselves with lots of buys or sells which they had no choice but to fill at the screen price (what you go by and this is their obligation, but before they could find matching orders (for every buyer has to be a seller and visa verse) they would have to change the price and they would then loose money through market exposure. This is bad for them and for us.

So what happens if there are all sells and the price is going up? Well the explanation is that the Market Maker had an order to fill and no stock to fill it with (this trade would not have shown up on your screen until somewhat later, which are referred to as delayed trades). Under their obligations to create liquidity in the share, the Market Maker is obliged to gather an inventory (Stock holding), but only until they can meet the above obligation. This is only possible if they can encourage people to sell, which can be achieved by raising the price...The order is likely to have been large enough allowing the Market Maker to gather a decent premium on the price. So once the order is filled and the market volume returns to their normal levels, so does the share price. You can see this through the daily highs and lows along with the volume at these particular trades in time or in sequence.

You've heard the term on these message boards all too often "shaking the tree". Well that is when the MMs moving the price up, which will encourages sells, moving it down also encourage sells. Another look is that the price was hiked way up despite the support level and few of the people who got in are now going to sell.. The rise was artificial and the real traders in the know just ignored it as it only lasted about 2 hours, but what was caught were investors who were in way before the spike and had forgotten about it, now they want out. Volume is a big part of this and sometimes folks ask "why the volume".. So the Market Makers order gets filled, the price settles back to a support level and volumes decrease and it starts all over again. This scenario is where shorty likes to hang his hat.

The above reason is why you should never put a pennystock in your sockdrawer and daily monitoring is an absolute must. You have heard me post such reasons and should be
part of every persons understanding and why the term "long" makes no sense and will only have you losing money.

Can you track such activity? So So and there are all sorts of tricks and one is mainly to reduce the volatility.. Sometimes this is mostly done by increasing the bid/offer spread therefore discouraging trading especially by day traders and also by marketing the companies shares, Loansharks as referred to equity financing (dilution) in the hope they will take up long term positions.

There are a couple of areas that MMs try to encourage liquidity and one is all to apparent. .Notice on the boards when posters beg the company to release news any news, well the MMs need this one venue to increase the liquidity and such encourages the companies to produce news releases, whether substantial or not.. It does create interest if you know what I mean.. The other area is by narrowing the spreads..

You ask if this practice is legal, well sort of and then not. See Market Makers are not supposed to allow themselves to go short, but in the process of making a market they may well find themselves short of a stock. If this happens a Market Maker has a number of options, purchase from another Market Maker, which they do quite often and it is allowed or play with the price in the hope that enough sellers will embark to cover the short or borrow the shares. The institutional borrowing, which happens on larger exchanges is much practiced, but in pennies is unlikely since institutions don't hold pennies unless it is from offshore loansharks and then they just speed up the dilution process to cover and of course a manipulated PR to help in this angle.. If that's illegal? Well my friends, this has been going on since the dark ages.

Thus you have your day-traders and their only means is to make money on the heels of the MM's, not your long-term holders, they will never recoup and that I'm sure of.

The key to trading pennies is timing and one must have an understanding of how the market markers play.. One rule that will always apply and that is the 3 day rule..

Never buy an issue on a 3rd day uptrend in pennies and sell on that return reverse of a swing on that 3rd day or the outside of the 4th day.. After that, if it hasn't gone beyond the lows before the uptick is the time to dump. In other words, never chase a stock..

Have a good day

Varok

Everything on this site is Copyright (c) 2000-2009 by KVR/Varok. This material may be distributed only with proper credit to and must include the Author.. Distribution of substantively modified versions of this document is prohibited without the explicit permission of the copyright holder.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Why not to buy a Stock after a 3 day run-up..

Here is a usual scenario on how this may come about..

After a stock has been trending down or trading flat for some time, suddenly one day it starts moving up, it continues up that day and then next day. On the 3 day of this run, it goes up, but for only the first 15- 20 minutes, then it drops for about 30 minutes, turns back up, but doesn't quite reach the morning high. After this period, it usually will trend down and the run is over and in most cases this stock has finished it's 3 day run.

This program will work in most cases and does apply.

So, if you're a buyer, this method will keep you from getting Emotional into buying a stock that has ready peaked, only to drop right after you bought it and I'm sure, many of you had this happen when buying stocks. This is what is referred to as " Chasing An Issue".. If you already own it, it gives you the timing to get out with usually the best profit or close to it. Which ever case applies, decide whether you want to buy it only after the drop. Depending on the stock, it can drop for a few days, and may take some time until the next 3 day advance. Be assured, that in pennies, this has been repeated over and over again with many of the same issues.. This is what you have a "Watch list for" to track issues..

The rule here is simply to let you know it is over for now.

The next time someone mentions a stock, look at a chart and see how many days it has been going up. If it's not the first day or maybe second day of the run-up, stay away for the time being. In the first 15-20 minutes after the open of the 3rd day, the issue will usually drop or in most cases just stall...Now of course you must determine this by seeing if a PR and the strength of such PR warrant further advancement, but from the history of most penny stocks, these PRs only have a very short run span..

Although, the system is not perfect it does help in timing.

Sometimes a stock continues up until 20 minutes after the open of the 4th day before it drops. Selling your stock 15-20 minutes after the open of the 3rd day of the run-up is usually the high or close enough to it. You will go broke trying to find the exact top or chase into a run, forget about it and leave your emotions out of the trade. It is in this segment that Greed usually plays on your Emotions and Anxiety..Play the 3 P's..

And how does this help in buying??

Well, that is a little more difficult, but the system does work. It is mainly there to protect you from being a "Stock Chaser". But the system will work and you must apply discipline.

Go to any stock website and look up a few stocks that are up....Jot them down...I only do this with OTCBB market stocks, but does work on most issues..

Next, I take my stock picks and go to any chart site to look at a 5 day history. The 5 day gives you a nice feel of the trading chart of the last 5 days. Notice why the 5 days compared to the 3 days.. This is so you will see the up or down on the 2 extra days and can avoid the pick. Look to see if it is the first day of the run-up. If it is the second or third day on an up swing, forget about it, since the above method has completed their run on these stocks and you will be only buying into a run or when it is reading to peak.

If I have any choices left, then go to a chart to see a 1 year and a 30 day chart to get a feel of what the stock has been doing. Keep in mind that the past is no bearing on what a stock will do in the future, but it will give you an idea...This also helps in determining what if any reason for volume and price spikes or drops.. Some chart sites allows your cursor to move along the graph for pertinent data with actual numbers.

My last stop is always the message boards and my favorite was RB, but now I go to iHub and there are others. It is here where you can get a real good idea why there is interest or reason for lack of..I don't rely so much on what is said on message boards and ever react on my decision to buy or sell..However,these boards do give you a sense on what others are thinking and many will go above and beyond to gather up DD..

After you have made your picks on which ones to buy, I have found that mid-afternoon is always an excellent time because of lunch and the morning rush has calmed down. The mid-afternoon session is slow before a strong rally that many times comes before a close. I have found mid-mornings are also good for buying, but still leaves many with high expectations that moves a stock for no other reason than emotional buys and it is this play that you want to stay away from.

Now stay on top of your picks and see if the next day it has moved up and determine the volume.. Determine if the highs are higher than the close and higher than the highs of the previous day.

On the third day, I sell it 15 to 20 minutes after the open to take advantage of the morning gap. That's pretty much it.......If your inclined to trade the same issues again, wait for the next above program cycle.

Not all stocks go up for 3 days. Some just flatten out and when this happens, just get rid of it after about 15-20 min. from the open on the 3rd day. If you fail to exercise this you will be left with major % loss and may never recover.. So a little loss is much better than an overall wipe-out.

Stocks that suddenly go up and you see there has been almost no volume the days before the sudden rise, this is usually indicative of a sign that a newsletter picked the stock or it is being pumped or hyped. The lack of previous volume makes the stock spike up.

This 3 day rule is a universal application and to each it's own method of how one should conduct such a process..

Good luck and solid trading and as always, apply sound DD, but keep your Emotions and Anxiety out of this arena and trade for profit not greed..

I hope that this will help many to be able to at least maximize profit taking..

Have a good day

Varok

Everything on this site is Copyright (c) 2000-2009 by KVR/Varok. This material may be distributed only with proper credit to and must include the Author.. Distribution of substantively modified versions of this document is prohibited without the explicit permission of the copyright holder.

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#94	Good Saturday Afternoon,	varok	04/24/2010 12:19:12 PM
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#87	Good Morning,	varok	12/08/2009 10:12:26 AM
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#84	The 3 P's of Investing and the Strategy	varok	05/21/2009 09:42:26 AM
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#82	Market makers control the action on the penny	varok	05/21/2009 09:40:01 AM
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#79	HI Mick,	Eagle1	09/06/2008 11:00:00 PM
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