If you have a small account, you might be wondering what kind of long-term strategies you should be focusing on. Throughout the last couple of years, I’ve found a few long-term strategies that work well for beginners that I’ll share with you.
OTC Multi Breakout
The first one is over-the-counter (OTC) multi-month or multi-week breakout. For starters, make sure that you keep consistently trading and keep volumes increasing everyday. If you are buying the breakout level, it typically takes about 3-4 days for it to go up about 30-60%, sometimes even 100%. But those trades aren’t that common anymore; that sector kind of died off, OTC pumps don’t really exist anymore. But every so often, maybe 10 times a year, they happen, and they all have that OTC hype. They bring a lot of sympathy plays, starting with the month breakout. That’s the first long pattern I would look for.
The second pattern is dip buying huge market caps when they instantly pool around 30-50%. We typically we see this about 10 times a year, in something like IGC or NBEV. Once you find a solid support or the area that is consolidating the most, you can dip that. From there, they typically bounce back from 20-30% and don’t have much time. That’s a really stable pattern that we see often, it’s been in the market for a while and it’s really reputable. I think there are some really good opportunities here for small accounts to focus on that kind of strategy and slowly grow your account. It won’t be fast, but it’s very steady.
The third pattern is crowded trades. These have been happening a lot recently with the increase of people in the market getting into this sector. This is where the stock is trading 30-60 million shares a day, and it’s increasing every single month. We can see about 50 tickers that trade 15 million shares or above per day. Think about it: 90% of people are going long and 10% are going short. The stock only has a certain number of shares to trade, and more and more people are getting into it, which means most of the trading that happens will be long.
If the stock is gaining in volume, more and more people will get into that long side and the short side will get overwhelmed, which is why product trades always benefit for the long side. If you see a ticker that has solid news, is on the uptrend, and just broke out in the consolidation area, you have the opportunity to take a partial long-term trade in there, especially on really low flow stops. It can get crowded and spike for the first hour or two, but then it pulls back in the afternoon down toward your offer. In the morning I think it’s more reliable that the stock is going to spike at least 20-30%, so you can gain that little bit of range out there.
When you are thinking about going long or short, there’s a lot to consider. People often think that if you go short you can lose over 100% of your investment, whereas if you go long you won’t be able to lose over 100% of your entire investment. But in the end, who will let that 100% go? It’s all about the risk management with short or long. Whether you want to go long or short, it’s much better to learn both sides. If you know what short sellers are thinking, it can help you get a better entry. If you’re a short seller, you should learn the mindset of people who are going long, like what kind of hit will cause the long buyers to start to panic. Always get to know both sides.