Stop Loss Orders – The #1 Trading Tactic with Penny Stocks

Stop Loss Orders – The #1 Trading Tactic with Penny Stocks


This is the single most important trading
tactic of all! If you do this one simple thing, you will
be a great investor. This easy stock market trading technique is
more important than just about all of the others strategies out there. It’s going to protect you from the downside
risks, with penny stocks and large stocks alike, while keeping you locked in for any
potential gains. Check it out! I want to talk to you about stop loss orders. These are absolutely imperative! First, on behalf of my entire team, I wanted
to express our gratitude. You guys are really amazing, and we will keep
bringing you these videos to help you profit from penny stocks. Please share the videos, like them, subscribe
to the channel – whatever you want, you guys are grown-ups, you know what to do. Now, stop losses are the number one trading
tactic, and will protect you from the downside in volatile stocks, while keeping your gains
locked in. You should be using stop loss orders always,
whether you are trading IBM or Apple or McDonald’s, and especially when it comes to penny stocks. If you aren’t already, you can start using
them today! Here is how it works: If you buy shares, you
can set a stop loss just below the price you paid. Maybe 5, 10, or even 15 percent below the
purchase price. Then, if the shares fall lower to your stop
loss trigger price at ANY point, for ANY reason, you immediately sell the stock. So, let’s say you buy IBM at $173. You might set your stop loss trigger price
at $169, then if the shares head lower to that point, you immediately sell. That limits your total worst-case downside
risk to about 3%. However, if the shares acted as you hoped
and started moving higher, the gains will often be significant. Usually, your online discount broker will
allow you to set automatic stop loss orders, so that you don’t even have to be actively
watching the shares. You might buy a stock, set your stop loss
trigger price, and theoretically wouldn’t even need to keep an eye on the investment. In some cases, with some brokers, they will
not allow you to use stop loss orders. This is especially true with penny stocks. In such cases, what I personally do is to
use what I call a ‘mental stop loss.’ Perhaps I buy a penny stock at $1.08, then
I choose a ‘mental stop loss’ trigger price. Let’s use 98 cents in this example. If the shares rise, I profit. If they fall, I sell and take the tiny loss. Even if your broker doesn’t allow you to set
up automatic stop loss orders, you can set up an alert through them, or free online portals
like Yahoo Finance, or Google, which gives you an e-mail or text if and when the shares
trade at the price you specified. Then, it is just a matter of following through
on your mental stop loss commitment. You decided you would sell if the shares fell
to a certain price. Then, the alert tells you that the stock has
fallen to that point, so now it’s all up to you. I will be the first to admit that following
through on a mental stop loss is much easier said than done. Typically, people will try to talk themselves
out of the commitment – they might say things like, “oh, it’s just a bad overall day on
the markets,” or maybe, “this stock will rebound because of this or that…” It is also hard to “lock in” a loss, or admit
an investment mistake. People tend to hang in there, hoping the shares
will rebound. More often than not, the shares drop even
further, and sometimes significantly. Taking the early 4 or 5% loss when you should
have, is usually much more profitable than not following through on your original stop
loss decision. You could take a lot of 5% losses before it
is going to matter. Besides, it is not all declines and downside
– you are going to find winning stocks too. As I show you near the end of this video,
stop losses can really lock in your profits. When your shares keep moving higher, that’s
when stop loss orders get really fun and profitable. Is there a downside to stop loss orders? Yes, there is, and it is called “getting stopped
out.” Picture this – you set your trigger price
6% below what you paid for the shares… then the stock dips 7%, triggers your stop loss,
and you sell. Before the digital ink is even dry on your
sell confirmation, the shares bounce back up, perhaps even to prices higher than you
had originally paid. This happens. It is all part of the deal, but a small price
to pay in exchange for limiting your risks, and consistently benefiting from the great
side of stop losses. Besides, there are things you can do to minimize
the number of times you get stopped out. If you find you are getting stopped out a
lot, you may be setting your trigger price too close to your purchase price. Look at things like trading volume – the higher
the trading volume of the stock, the closer (OR “TIGHTER”) you can usually set your stop
loss, because the shares aren’t going to be jumping around quite so much. Also consider that shares have a certain degree
of natural volatility – if you buy at $1.00, then use a stop loss price at 99 cents, you
will almost certainly get stopped out. We also show you in another video the impact
of support levels, which serve as great price points for stop loss limits. Picture that same $1 penny stock from our
example – if it has significant support at $1, then using a 99 cent trigger makes more
sense. Now, when talking about penny stocks specifically,
since they are more thinly traded, and many of the investors in them are less-experienced,
they are more commonly traded at threshold prices – this means 50 cents, $2.00, $1.50… You won’t see a ton of penny stock traders
all gathering around the $1.32 or $0.71 price points. They often will be trading at round number
prices – these are more significant in the penny stock world, and they should be considered
when deciding on the best trigger prices. Now, there is also a very good side to getting
stopped out. Picture this scenario, and it happens a lot: Let’s say for example that you buy at $2.23,
and you get stopped out at $2.11. Then the shares keep sliding lower, all the
way down to 48 cents… When they reach a bottom, and show signs or
reversing to move higher, you could then buy back in for about 75% lower than your initial
purchase price. Failing to use a stop loss limit is like going
down with a sinking ship, while using one can be more like waiting until the fix the
leak, then getting back onboard. As we grow, and because you asked for them,
one of our new PETERLEEDS.com features is that we provide our opinions of optimum stop
loss prices, along with the buy and sell ranges for the short and long term. Now, I promised to discuss the really great
side of stop loss orders. Specifically, this involves trailing stops,
and is a great way to lock in profits when the shares are increasing. Picture this: You buy shares at $3.12 – you set a stop loss
at $2.95. Then the stock climbs towards $4. You then adjust your stop loss trigger price
higher. A month later, the shares are at $4.85, so
you decide to increase your trigger price again. As the shares keep rising, you can keep increasing
your loss limit trigger price. At any point, if the shares reverse lower,
your stop loss order will ensure you keep most of your profits up to that point. On the other hand, if the shares continue
to soar, you can keep increasing your guaranteed profits by moving your trigger price, continually
trailing the rising shares.

27 Comments

  • Brutus Empire

    February 12, 2017

    great video

    Reply
  • Zhanki _

    February 12, 2017

    Hey Pete what do you think about Tim Sykes, is he for real or a fraud.

    Reply
  • BadCow

    February 13, 2017

    Hello Peter. I just ordered your book "Penny Stocks For Dummies". Looking forward to reading it cover to cover. Also, I really appreciate you taking the time to post these videos and thank you for speaking in terms that newbies can understand. Keep up the good work.

    Reply
  • Leo Castro

    February 13, 2017

    I like how you explain in full detail on all the scenarios.

    Reply
  • jeyson ghobadi

    February 13, 2017

    peter , what do you think about holding stocks overnight?? too risky?

    Reply
  • Vehicle Maniac

    February 14, 2017

    Any advice for a 17 year old trying to learn penny stocks on when to buy and sell

    Reply
  • Josh Atchison

    February 23, 2017

    I'm so freakin' excited for this! I'm so tired of struggling.

    Reply
  • Keanu Leachay

    February 23, 2017

    Hey Peter, what do you think about warrior trading (Ross Cameron) and their trading techniques?

    Reply
  • Edsel villacencio

    March 20, 2017

    I've been watching your videos everyday now and they are just very helpful. You are such a blessing Sir. How can I be your student?

    Reply
  • gattowilli

    March 24, 2017

    But what happens if the price drops under my stop loss – limit in the after hours trading ?

    Reply
  • King Cesar

    April 2, 2017

    Great videos!

    Reply
  • POPE INVESTMENTS

    April 19, 2017

    Enjoying your honest and credible explanation

    Reply
  • Condo Views

    April 29, 2017

    Hi Peter, great video! Who are some of the online brokers that allow stop loss with penny stocks?

    Reply
  • Fadi A

    May 13, 2017

    dont forget algos, love hitting stop losses lol

    Reply
  • iWolf Financial

    June 1, 2017

    if u got a small $1,000 account how much to I buy shares at ? should I invest $25 to $50 in each company

    Reply
  • SimpleLifeBest

    August 5, 2017

    The only problem with SL is the MM figured it out and crash the price of most stocks at open to trigger stop loss so over time you lose 1-2 percent over and over.

    Reply
  • PrestoWind

    August 28, 2017

    Peter. Stop losses are an easy way for the pro's to pick your pocket. It's a double edged sword. Good video.

    Reply
  • Delsin Rowe

    November 12, 2017

    Thank you for the amazing video! Yeah tslo/slo are one of the most important part of having strategy/setup in a trade. A platform/broker with tslo/slo would be a perfect combination too

    Reply
  • Charles

    November 14, 2017

    I've done stop losses, but I've begun to put my stop losses where I still collect a profit. I'm not into losing unless I've loss immediately after entry.

    I would rather lose 2% of of a 5% gain instead of losing 1% off of an entry point. I'm taking the approach of not doing the FOMO (Fear Of Missing Out). There will be another stock and another trade for another day.

    Reply
  • danny Mason

    November 21, 2017

    Great video, easy to understand and giving examples really makes it real! Thanks for the knowledge,

    Reply
  • Personal Email

    January 13, 2018

    Just subbed

    Reply
  • frosti2k2

    January 26, 2018

    Hi Peter. Could you please briefly explain the difference between a stop – loss and a stop – limit order? Which is the best one to use? Thanks!

    Reply
  • Dale Trotman

    March 17, 2018

    This is good, but I think you can go a step better. Set a percentage trailing stop. The stop loss increases with the price rise-
    it doesn't go backwards. So, you only lose a percentage from the highest amount, and it keeps increasing with the price.

    Reply
  • Cicero Araujo

    April 1, 2018

    U r an amazing person

    Reply
  • Cicero Araujo

    April 1, 2018

    U should have your great video translated into other languages

    Reply
  • Bret

    April 6, 2019

    Great video, thanks for creating and sharing it.

    Reply
  • Joseph Whitaker

    August 10, 2019

    Hello and thanks for the lessons! Could you tell me: is there a charge for each time you set a new Stop Loss? Thanks

    Reply

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