MJ Stocks Analysis

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8 Tips for Pot Stock Trading/Investing
1. Trade only with what you can afford to lose
Don't bet the kids college fund or take a 2nd mortgage on your house to plow into cannabis stocks. This is still an incredibly volatile sector. Sure there will be some major winners here but there will be just as many losers.

2. Trade in cash, not on margin
This goes hand in hand with rule 1. The biggest problem is that if you are caught in a position that goes south, the liquidity may not be there for an orderly exit. Stop losses do not alway get triggered especially in a major sell off.

3. Do your own DD
There is so much bad information going around about cannabis stocks. Use all the resources you have to find out as much information as you can about potential investments. Message boards occasionally provide some insight but it is equally as important to understand WHO is relaying the message as WHAT is being said.

4. Have a defined trading / investing plan
Make sure you set goals, targets and objectives. Have a timeline for your investment, whether it is short term or long term. Have an entry and exit strategy.

5. Don't panic sell or panic buy
Panic selling and buying are some of the worst mistakes a player can make. Selling into weakness is probably the worst mistake a market player can make. This relates a lot to points 1 and 2. If you can afford the position then you are much less likely to make irrational moves.

6. Be extremely cautious with short positions
Short positions in penny stocks can only be accomplished by shorting the equity since there are no derivatives markets yet. Shorting an equity leaves you with unlimited risk to the upside. Even worse, since most MJ stocks are penny stocks, the upside of shorting is limited to a few pennies. To generate decent returns it really only makes sense to short in large volume blocks which can be difficult to move because of an occasional lack of liquidity in MJ stocks. Rules 1, 2, 4 and 5 apply tenfold for short positions, especially rule 4.

7. Know the market
Not only should you have a good knowledge of how the financial markets operate and how to read a chart or do fundamental analysis, it is also important to understand the cannabis market. Read all you can about the history of cannabis. If you live in a medical state I'd highly recommend visiting a dispensary and even getting a medical card. Most people who do not live in medical states cannot even comprehend what these dispensaries are like.

8. Try to have fun
This market is filled with opportunity. Many of us have already had great returns but there is a lot more growth to come. Try to keep your positions inside your comfort range to enjoy trading and investing.