Warren Buffet says that his favorite holding period is forever.
That’s a great plan for the already wealthy, but what about everyone else?
Is the ‘Buy and Hold’ approach to investing going to work for someone like you?
I remember asking these questions while in college; sat at my desk with head in hands. I had read all of the books from billionaire tycoons: Warren Buffett, Ray Dalio, Carl Icahn and George Soros. I read all of the stock, investment and day trading books I could.
And quite frankly, I felt like I had to listen to their advice. I mean, these investors are billionaires. If you can’t listen to someone like Warren Buffett, who can you listen to?
Yet their advice didn’t seem to apply to a guy like me…
- I was still in college and although I had some money, I didn’t have a lot
- I didn’t have $100,000 — $200,000 to invest (which seemed like the minimum for Blue Chips)
- But even if I did, the returns were conservative at best (just 15–20% per year)
After doing paper trades and playing in the market for a while, I began to realize something. These large investors, hedge fund managers, investment fund managers, mutual fund managers and the people who share advice on TV were playing in a different playing field than regular people like us. They had so much capital that they were working with that they had to make plays with money in companies that had such high market caps so they wouldn’t buy out companies.
And while these strategies were great for an institutionalized investor, when it came to regular day traders or people who were just entering into the market, there were really no grounds to become successful from trading.
Buy and hold. That’s the perfect strategy for a millionaire. Or someone who manages a large fund at an investment firm. Or a large institution like Goldman Sachs or Morgan Stanley. But for people who are fresh out of college or maybe have less than $100,000 to invest with?
There was no way to really make a living out of those investment strategies. I know first hand because when I first started investing, I was…
- Still in college…
- Stuck in a dead end job I hated…
- And I had no economic degree or an apprenticeship with Goldman Sachs or Morgan Stanley…
But there had to be a way for me to make a career as an investor.
I used to work the night shift at my job in college. I hated it. From midnight until the end of my shift, I’d often just sit there with nothing to do. But as much as I hated it, it did give me a lot of time to think.
At first, I used the time to study for school.
But then I used it to study the markets…
Now I’m the type of guy who has large dreams. When I used to live in China, my friends and I would get together and we’d think of business ideas; things that could change the world, like a trash can that would automatically recycle what was inside of it. Things that could make the world a better place. But all of these things that I wanted to do, required money.
When I first came to America, I thought that I could go out there and make a lot of money doing real estate, but my lack of understanding of the English language made it extremely difficult for me to read contracts. I figured the only way I could really make something of myself was to do something that I could understand. That’s when I began studying the stock market. Graphs, numbers… my language barriers didn’t stop me from figuring this out.
There was a moment that really pushed me into the stock market and where I came to a point of no return. Where I knew that I needed to make it and if not, then I would have to go back to China, ashamed and tell my father how much I had failed. That moment was after my girlfriend had left me and my reality had completely shattered.
As a student on an F-1 Visa, I didn’t really have many career choices. The stock market, investments and day trading were really the only way I could make something of myself. So I attempted to invest the last $27,000 I had, which was supposed to be used for my college tuition.
The beginning of my trading journey started out rocky. I lost half my money in the first month of trading, but after that moment, I realized that I needed to take trading as seriously as possible. I bought every course I could and studied the market relentlessly and when I was ready to trade again, I took a loan from my friend. From there, I worked tirelessly to spot patterns in the market.
Now there’s something about me that as time went by, I found was quite unique to trading. Because I went to school for engineering, I had a few things that I enjoyed doing. I loved:
- Studying concepts, strategies and processes
- Breaking them down and pulling them apart
- Rebuilding them and figuring out a better solution
This kind of thinking used to get me in trouble when I was in my hometown, but now…well, maybe it would help me get out of trouble.
So I went back into the market and tried again.
Any investor would think that the countless articles, books and TV stars that talk about investing, would hold the golden ticket to making it big in the stock market.
- We’re told to study 10Ks and financial statements to see how well a company is doing before we make an investment.
- We’re told to look at changes within leadership.
- We’re told to look at the development of products and services.
- We’re even told to keep a close eye on the profits and losses to see how valid an investment is.
And while all of these are factors when it comes to trading blue chip stocks, they also limit the ability to pull in a solid return. Unless you really consider 15–20% a year to be a solid return. But on $20,000, that’s only $3,000-$4,000 a year. That won’t change anyone’s life, really. And if I tried following those strategies with my $27,000, half of what was mine and half of what I borrowed, I would never had made investing and day trading my full time career.
If you’ve seen my account on Profit.Ly, you’ve seen just exactly how much money I’ve made day trading, with all my verified trades. So I won’t talk about the money here, but instead I’ll share with you what actually works when it comes to trading.
In the past four years and after studying every single book and course I could about the topics of investing, stocks and day trading, while doing a ton of paper trades and real life trades, I came to find something that was just so shocking to me. The stock market was filled with patterns and these patterns were based on human behavior. Each time a stock would follow a specific upwards trend, it would follow the same downward trend. And this would happen 85% of the time and if you got in at the right time, you could earn a 25% return on the trade. And this same pattern happened 50–60 times in a single year. If you’re making the same type of investment based on a pattern and getting a 25% return 85% of the time on 50–60 trades… you can put the numbers together.
Some patterns I discovered yielded higher ROIs, as high as 35%. And they continued to happen over and over. Now, I use 8 core techniques that I discovered during this period of studying and teach them to my students, many of whom have also turned day trading and investing into a full time career.
I’ve refined these strategies year by year as the market gets smarter, but the principles remain the same.
And although I’ve taken a lot of inspiration from the likes of Warren Buffett…
I would not be where I am today had I listened to him, Ray Dalio and the other billionaire tycoons.
Why The Advice of Billionaires Will NOT Help You
Had I listened to Warren Buffett, Ray Dalio and George Soros, I wouldn’t have been able to exponentially expand my returns. Instead, I would’ve probably earned an extra $5,000 for the year. That wouldn’t have helped me pave out the career that I wanted for myself; to go out there and live my dreams.
I would have remained stuck at rock bottom and returned to China and faced my father’s consequences. I don’t know what they would have been, but they wouldn’t have been good, let me tell you…
So, why did the advice from billionaire tycoons not help me?
For starters, they have a lot more money. Their advice works if you’re already wealthy or an institutionalized investor because you have vast sums to invest and a 15–20% return still makes you millions.
Plus, they can afford to take bigger risks. Because they’re billionaires, they can take pride in earning a 20% return because 20% of $1 million is a hefty $200,000. But 20% of $20,000, which is what most average people could invest, isn’t that much money.
But this isn’t the main reason their advice didn’t work…
The biggest reason is that people like Warren Buffett will NEVER tell you about Penny Stock Trading or Small Caps. They have no interest in it and even if they bought stocks in these categories, they would accidentally buy out the companies. They can’t trade in these markets because they have way too much cash that they need to invest.
The mainstream media doesn’t cover these areas either because they like to cover what the biggest players do. It makes sense too. Who wouldn’t want to cover what Warren Buffett and Ray Dalio are doing? They’re the all stars after all.
You’re probably thinking, “Okay so if their advice doesn’t apply to me unless I have millions in the bank, then what do I invest in?”
The answer isn’t the new company that has some proprietary technology that will change the world. Statistically, the companies that yield returns like Apple and Microsoft when they first started are few and far in between. What you need to do is look for what mathematically has the highest statistics of success. And that is day trading penny stocks and small cap stocks.
The reputation of penny stocks and day trading is a bit murky because there are so many people out there who are setting you up for failure. And there is so much misinformation that it has created a market where 94% of all day traders fail. So most people usually stick to the safe route of blue chip stocks instead, but there is a way to really figure it out. But it won’t happen overnight. And if you’re thinking that, you want to stick to blue chips…
Well that was me too. In the beginning, I wanted to trade Blue Chips and invest into brand names.
It didn’t work for me, and it doesn’t work for most people.
What works for people like us are what the big players NEVER talk about.
Which is an opportunity for you right now because Penny Stock Trading and Small Caps are one of the best forms of investment you can make until you max out your earnings at around $5 million per year.
Why You Should Trade Penny Stocks (and Small Caps)
Before we dive into why you should, let’s overview some important information:
- A penny stock is a stock that trades at or under $5
- They’re made up of small public companies that initially trade at low prices per share
- When you find the right pattern and strategy, you can generate returns from 20%-35% per trade
- You can make a lot of money via penny stock trading (maxing out at $5 million per year)
- There is A LOT of fraud that goes on (meaning who you get advice from is very important)
Whereas a Small Cap stock defines a company with relatively small market capitalization. The actual value of this varies, but is generally a company with a market capitalization between $300 million and $2 billion.
The biggest benefit of trading Penny Stocks and/or Small Caps is that you can get started with very little money. Within months, you could double or triple your money. Within a year, you could potentially turn $20,000 into a six-figure trading portfolio.
The reason for this is that it’s a level playing field!
Unlike the world of Blue Chips, the more wealth you have doesn’t create more power. In that world, someone like Warren Buffett or Ray Dalio has so much capital that they can dictate the markets.
It doesn’t work like that with Penny Stocks or Small Caps. These companies only have a limited amount of shares, so if someone comes in and buys too many, they literally end up buying the company.
This is why institutional investors stay clear of Penny Stocks and Small Caps.
This is also why the main media never covers it, or why books written by tycoons talk about it.
They don’t need to. It isn’t relevant to them, and it wouldn’t help them make more money.
But it can help YOU make money (and a lot more than you may think is possible…)
One of the main drivers of this is that these markets provide a level playing field for everyone!
You don’t need a degree or years of experience…
You don’t need to invest your entire life savings…
You don’t need huge stacks of cash just to enter…
It’s a market anyone can get involved in.
Although there’s a BIG “but” to all this, because the biggest issue is knowing who to listen to, the truth is there are a lot of fake gurus and scammers in the Penny Stock Short Selling world. I would love to tell you there isn’t, but that’s the harsh reality of this market. The reality is there’s a lot more bad advice out there than good.
This is how most people lose their money and why Penny Stock Trading and Small Caps have a bad rep.
The “Right” Advice is “The” Most Important Thing!
I learned this the hard way.
While at rock bottom — and after realizing books by Warren Buffett wouldn’t help me — I enrolled in every course I could find and followed anyone who seemed like they had found success with penny stock trading.
It’s not to say all their advice was bad…
… but most of it wasn’t very good!
They spent most of the time talking about cars and the lifestyle they live, rather than the trades they make. And when they did talk about trading, I quickly learned a lot of their advice was dated.
I would test these strategies out on paper trades and it wouldn’t work.
Yet they had huge followings, seemed to make a lot of money and people sang their praises.
I became skeptical about most of them. But it was fine because I was in the mindset of studying their methods, rebuilding them and creating something better on the back of it. The problem is, most people don’t do this. They take what they say as gospel.
This is how people get scammed!
One of the tricks these so-called experts use is to make their courses as complex and overwhelming as possible. I experienced this firsthand as I drowned under all their content, wasting a lot of time on irrelevant strategies and techniques.
Each course seemed to have one or two pieces of gold. The rest of it was just them bragging about the toys that they had. Also, these experts weren’t verifying their trades either. They talked a big game, but couldn’t produce account statements that showed me that day trading was how they actually made money.
I couldn’t believe what I saw and I cannot believe what I still see to this day. I can’t tell you how many students I work with through my own courses who tell me stories about getting scammed by another.
They trusted what they said. Why wouldn’t they… they’re an authority with a huge following, after all.
It’s not that long ago I trusted these so-called experts, too. I figured they were the real deal.
If there’s one thing I hope you take away from this article, it’s to find and follow the “right” people.
With the right advice, you can make GREAT money trading Penny Stocks and Small Caps.
With the wrong advice you’ll likely lose a lot of money and be worse off than you are now.
But Come on… is it Ever a Good Idea To Trade Blue Chips?
I understand the obsession with Blue Chips and Brand Names. I, too, obsessed about this in the beginning. I would watch a movie like ‘The Wolf of Wall Street’ and fall in love with the lifestyle. Reading about Warren Buffett had the same effect.
Investing seemed like such a cool way to make money. Yet, I had a certain perception of what “cool” investing looked like and Penny Stock Short Selling and Small Caps weren’t it.
So, if this is where you are, I understand where you’re coming from.
Yet, if there’s one lesson I’ve learned in recent years, it’s that your trading career evolves.
Most people need to begin with Penny Stocks or Small Caps because there are fewer barriers to enter. It’s a level playing field… You can go in with a small amount and start making good money within weeks.
After a few years — where you perfect your strategies, gain more experience and become more efficient — you can cap out at $5 million per year.
Once you reach this level, you’re ready to deal with Blue Chips.
But you won’t get there immediately. It’ll take around half a decade without a mentor to break the $1 million mark, but it could happen in as little as a year and a half to two years with a mentor.
But until this stage, it WILL NOT help you…
For starters, you need a lot of capital to deal with Blue Chips (at least $100,000 — $200,000). But it isn’t just the money that’s the problem:
1: You Have Less Control
Unlike with Penny Stock Trading, there are fewer patterns when dealing with Blue Chips. The markets always change and most of the time it’s unpredictable. This means you can’t rely on specific strategies and techniques, so instead you have to do a lot of research (all the time). This leads us to the next one…
2: You Need a Team
At this level you need to do a lot of research throughout the day, every single day. Even if you’re gifted at statistics, it’s almost impossible to do all you need to on your own. You need to read 10Ks and financial statements, and deep dive into the company history, plans and strategies. Unless you want to work 23 hours each day, you need a team (and a team costs money, and someone has to manage it)…
3: You Are a Small Fish in a BIG Pond
There are no big fish in the Penny Stock Pond. Everyone has the same opportunities. Once you deal with Blue Chips you go up against huge investment funds and people with billions to their name. Even when you have $5–10 million, you remain a small fish at the mercy of some of the world’s most powerful people.
None of this is an issue when you trade with Penny Stocks or Small Caps. You have more control and there are clear, predictable patterns that produce returns of 20–35% on a daily basis.
These patterns appear again and again.
The money you make is predictable.
The time you have to put in is predictable, too (often just a few hours each morning).
You don’t need a team and although there is some research, you can do it all by yourself.
Best of all, there are no big fish in these markets.
It’s a level playing field, giving YOU the opportunity to win as much as the next guy…
But maybe you’re thinking… what if I find the next Tesla, Apple or Microsoft?
If you do, you’ll make a lot of money. But the chances of this happening are slim.
If we look at Nasdaq, there’s a total of about 18,000 tickers. There are so many stocks, and there’s only room for a few of these companies to hit the levels of Apple, Amazon and Facebook. Even with huge amounts of research and a gut feeling that this company is the next big thing… Buying and Holding on to their stock is a huge risk.
If you have a few-hundred-thousand dollars to spare, fine.
It can sit there and in time it may make you some money.
But if you need your money to compound quicker… Blue Chips are not the answer.
How To Get Started (Not Get Scammed, Make Money Fast and Win BIG)?
We’ll talk about next steps soon, but first I’d like to answer a question I get asked a lot
Steven… Why Do You Trade on Nasdaq?
A lot of people associate Penny Stock Day Trading with OTCBB or Pink Sheets, whereas I exclusively trade on Nasdaq…It surprises people, but my reason for doing this is simple: TIME!
I like to trade in high volume and get in and out quickly.
OTCBB or Pink Sheets work in smaller volumes and there’s a delay (of around 2 minutes) between you making the deal and its execution. That may not seem like a long delay, but during this time the price could drop by up to 20%. And you can also get stuck in trades where you’re holding the bag because no one is executing buy orders on the other end.
The Nasdaq, on the other hand, is immediate. There are no delays. I can find my trade, make a decision and execute it in seconds. It doesn’t matter what your strategy or technique is, TIME and having the ability to execute your orders is always important.
You don’t want to get stuck on trades or lose your profit within the two minutes it takes to executive your contract, and for these reasons, I avoid OTCBB or Pink Sheets at all times.
This is just the tip of the iceberg, though.
It’s one of the reasons new traders tend to fail, but not the only reason…
I’ve written a separate article that dives into why 94% of traders fail and how you can ensure you win. I wrote it to follow-on from this article because I see too many new traders make the same mistakes over and over.
What’s worse is, I used to make these exact mistakes.
It cost me a lot of time and even more money.
I don’t want that for you, so I encourage you to read this.
By reading this follow-up article, you’ll learn:
- The main reason why 94% of first time traders fail…
- 3 trading myths that are not true (and WILL hold you back)
- The steps you do need to make to avoid failure and win big
To open this step-by-step article, click here
Warren Buffett is an inspiring man who offers some amazing advice. When he says to ‘Buy and Hold,’ he isn’t wrong. BUT, if you’re reading this article, chances are that advice isn’t for you (yet).
It’s an evolution. You will get there so long as you follow the right advice and execute the correct strategies. It’s possible to turn tens of thousands of dollars into a new full time career where you’re earning a six and sometimes seven figure income.
Once you hit that level, dealing in Blue Chips may be the answer you need.
Until then, it will likely keep you stuck where you currently are.
If you have any questions about Penny Stocks, Day Trading, Small Caps or Blue Chips, please leave a comment.