Trading vs. Investing

Trading vs. Investing

It is important to understand the difference between penny stock trading and penny stock investing.  This site is called Penny Stocks Trading for a reason.  I am not here to invest in Penny Stocks.  I am here to trade Penny Stocks.

Investing in Penny Stocks is a roll of the dice.  You have no idea how these companies are going to fare long term.  I definitely do not want to hold them and hope that all things will work out.  Don’t get me wrong, you will get lucky from time to time but I doubt that your luck will offset your investing tragedies.   It is just too hard to pick companies such as this with any certainty.

You may ask yourself, what is the difference between this and the uncertainty of trading?  Isn’t the risk just as great?  Well, there is risk in any sort of investment or trading.  Anyone who tells you otherwise is lying to you and obviously has been on another planet for the last few months.

However, when we are trading we are trading short term technical signals that indicate that there is a positive momentum to the stock.  That momentum may last a month, a week, or only a day.  We will also have rules put in place to prevent any major damage to our portfolio.

I have been fortunate during the recent market carnage because I haven’t been hurt.  I have fellow employees who have had 40% of their 401K wiped out.  My boss had over 35% of 28 years of his 401K destroyed.  I often wonder why this happens.

It is because everywhere we turn we are instructed to invest for the long term.  Well, I guess many of these people don’t have a choice anymore.  They are now in it for the long term.  It is the only way to recoup their losses.

Why wouldn’t they trade out of their positions and re-enter at another time?  Because they have been conditioned not to do so.  They have been told not to pay attention to the day to day market fluctuations.  I should know I used to be a broker and this was the line I was instructed to feed to my clients.  I thought it was a bunch of crap then and my opinion hasn’t changed any in the subsequent years.

I do not care about the stocks that I trade.  They are objects to be used.  I do not fall in love with them.  I feel no obligation to stay in them.  Most work out but some do not.  When they don’t I cut my losses and move on.  Investors tend to let their losses run.  They assume they made a good investment choice and will be rewarded at some point in the future.

Today, for many their breakeven point is now many years in the future.  I suggest there is a better way and short term trading is it.