# Sub 10c medium term trading strategy



## pavilion103 (19 October 2013)

A few months back Tech spoke to me about potential of trading sub 10c stocks. I would like to share my thoughts. 

No doubt this is a more speculative/volatile trading approach, and thus I am devoting a smaller portion of capital to it. This is no 'get rich quick' scheme but rather an interesting approach which can achieve high RR returns. 

First of all, the key is to be able to identify setups. I may go into this in some more detail another time. I have become good at identifying these setups. In a nutshell they involve scanning for ultra high volume. The initial setup aside, there are a few benefits of this trading approach: 

1) Getting in sub 10c, you can take trades in 0.001 increments, rather than 0.005
2) Because the percentage gap between entry and exit is larger than that of a >$5 stock, you are able to take a much smaller position yet still have much larger R:R potential (this leads to good opportunity cost of capital). This allows you to hold more positions, using up less capital. 
3) Because of the high RR potential you only need a small accuracy rate to maintain a good profit. 
4) You can sit on these for a while, trailing the stops loosely and you might happen to catch a life-changer in the process. 

Caution: Don't neglect risk management. Try and get stops to breakeven asap. Still implement a trailing stop to ensure you don't give back all open profit!

I may even post potential setups in this thread as I identify them.


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## pavilion103 (19 October 2013)

*Case Study 1: MNW*

Some of you may have seen me discussing this stock. Originally I bought it at 10c, it went into a trading halt that very day and then I told it two days later for 18c. My initial stop was 0.077c. This was a nice 3.5R profit. With $500 of initial risk this is a profit of $1,750. Not bad for 2 days work. 

At the time I had to consider how I would go about exiting this stock. I had some wise advice from Tech because these can often die off and then profit is lost. 

I have also considered another option. This involves a small portfolio of these types of stocks being held over the medium term, moving the stop to break-even, and then letting it run. The RR potential makes the opportunity cost of capital very attractive to be used in this way. 

See the charts below. 

(note anything can happen from here, including the stock taking a nosedive. Implement some sort of defensive strategy.)


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## pavilion103 (19 October 2013)

From this trade we can see a 13R open profit at the moment. The added benefit of this strategy is that a couple of huge wins (say a 20-30R win) can allow us to have many trades between breakeven and 0.5R-1.0R losses and still be above water. 

*Case Study 2 - SDL (entry this week)*

This is one that I actually took this week. It may lead to nothing, but it may also take off. We will see. This is an even tighter entry than MNW. 

Entry details and current profit are on the charts below. 

***Note*** 
- Stop is already at breakeven, so the risk has been eliminated in this trade in the opening 2-3 days. 
- For some $4,500 may be too large of a position size to hold for a speculative strategy like this. Even if we have a portfolio of 10 stocks with a position size of $1,000 each, there is good profit potential. 

If one of these 10 stocks takes off then we are laughing. As Tech always says, it's about getting in front of the train. 

I'm not at all suggesting this would happen but if SDL did return to it's former highs of around the 60c mark, this is how we would look. 
Price: 0.60
Shares: 55,555
Position size: $33,300
Profit: $28,800 (58R profit)

Holding $1,000 position size = $6,400


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## pavilion103 (19 October 2013)

*Case Study 3 - RIA (entered the setup this week)*

This one has an even wider percentage between entry and initial stop, allowing us to take a position of just under $2,000, with $500 risk. This kind of math offers very high RR potential. 

***Note***
- Stop has already been moved to breakeven. Risk eliminated. I may get stopped but I don't care. Either it takes off or it doesn't. 
- *Speculative:* if it reaches it's former highs of around 80c, this is how we will be looking:
Price: 0.80
Shares: 62,500
Position size: $50,000
Profit: $48,000 (96R)

- on $1,000 position size = $24,000 (48R) - not bad for a $10,000 portfolio of 10 stocks.

Maybe worth holding $1,000 of this type of stock with that type of potential.


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## pavilion103 (19 October 2013)

These are the only 2 setups that I am currently in. I am scanning for more and looking to hold between 5-10 if I find some good ones. 

Please note that this is highly speculative. We cannot count on these types of returns. My thinking is as follows. 

1) A nice little side-strategy with huge ROI potential to put $10,000 into,holding 5-10 stocks and see what happens. 
2) The speculative returns above are highly unlikely, but if we are holding between 5-10 stocks, you never know. One may be a big fish.
3) I touched briefly on the risk management side of things but want to reiterate, we cannot be loose in our thinking. Risk management comes first. As you can see, both my stops are to breakeven already as was the case with my MNW trade after day 1. Don't be complacent. 
4) I have not touched on a trailing stop strategy but I do have one. I want to ensure that I am freeing up cash for new opportunities should the stocks I am holding really drop off. However, I will not be exiting willy-nilly as the whole point of my strategy is to catch a 50-100R winner.


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## pavilion103 (19 October 2013)

I might even consider running a mini portfolio online in real time (similar to the Tech and Pav one in the other thread). 

This would be far less involved, with fewer setups and fewer updates to trailing stops. It would be more of a buy and hold one.

I'm not sure how I will go with time, but we'll see. 

I've already setup a spreadsheet with the first two stocks included: RIA and SDL. 

I will need to clarify the rules in terms of posting charts with company codes/setups, as I don't want to get in trouble for being seen as giving advice (which I am not).


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## pavilion103 (19 October 2013)

*SETUP*

A bit of a wider percentage stop on this one

I'm thinking maybe we risk $250 on each trade. This will make it more affordable for people (not that they will be taking these particular setup --- but rather for illustration sake.  
Shares: 15,625
Position size:$625


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## pavilion103 (19 October 2013)

*please note a couple of errors. 

Where I've put "with $1,000 position size ="
I meant "with $1,000 profit ="


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## kid hustlr (20 October 2013)

Looks really interesting Pav!


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## TheUnknown (20 October 2013)

Sub 10c strategy....is great, Just look at (SIR) what happened in 12 months.

Avoid the share gurus who sell books for a living that is the best strategy.


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## fiftyeight (20 October 2013)

Great stuff PAV

Look forward to seeing how this goes


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## PinguPingu (20 October 2013)

Really enjoying Tech and your trading in the other threads and looking forward to this strategy! Closely watching PCL lately with its recent reversal


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## pavilion103 (20 October 2013)

TheUnknown said:


> Sub 10c strategy....is great, Just look at (SIR) what happened in 12 months.
> 
> Avoid the share gurus who sell books for a living that is the best strategy.




Interesting SIR....

I went back over the chart and realised I actually marked this one up at 10c at the time. I wasn't taking these sorts of trades back then, but interesting.

I guess this sort of chart illustrates the point that it is possible to get on a big winner if you're in enough trades. From 10c to $5 in less than 12 months. I probably would have got out at somewhere between $3.80 - $4.00 on the way back down.

The issue with this one is how much the stock opened up on the day it began its amazing run. Would not have got close to the fill desired. Hypothetically if we had, for $250 risk, we would have a position size of $1,700 and a profit less than 12 months later of around $60,000 amazing!

If we can actually get onto one of these (with good entry) during this exercise it would be amazing. I will be taking most of the trades myself.


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## pavilion103 (20 October 2013)

PinguPingu said:


> Really enjoying Tech and your trading in the other threads and looking forward to this strategy! Closely watching PCL lately with its recent reversal




Good one. Will put this on the watchlist.


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## CanOz (20 October 2013)

TheUnknown said:


> Sub 10c strategy....is great, Just look at (SIR) what happened in 12 months.
> 
> Avoid the share gurus who sell books for a living that is the best strategy.




I know a share guru who writes books and has a great track record. Don't lump them all in the same boat.


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## burglar (20 October 2013)

pavilion103 said:


> Good one. Will put this on the watchlist.




If Iron Ore turns north, I'd expect Flinders Mines (FMS) to do likewise!


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## pavilion103 (21 October 2013)

One of them was a big mover today. SDL. Already at 5R profit. A solid start. 

Interesting that there is a bit of a gap to around the 20c area. Let's see if it can get there without too many problems. It will be an interesting few days.


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## pavilion103 (21 October 2013)

I think for the purpose of the exercise I'll do a $20,000 account risking $400 (2%) per trade.

Was tossing up between $20,000 and $10,000. I wouldn't want to go any higher.


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## pavilion103 (21 October 2013)

Have included SDL and RIA as I started my own personal sub 10c portfolio with these two last week. These are the only two stocks sub 10c that I currently hold. I didn't include my MNW trade because it was too long ago. These are the only three sub 10c stocks that I've held in that time.


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## pavilion103 (21 October 2013)

*SETUP 4*


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## pavilion103 (21 October 2013)

Another couple of interesting ones are DML and TCN. No setup for them but both fall into the 10c category and have had some recent volume appearing.


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## fiftyeight (21 October 2013)

They look like tradeguider charts, are you using only VSA to find and manage these setups?


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## pavilion103 (21 October 2013)

fiftyeight said:


> They look like tradeguider charts, are you using only VSA to find and manage these setups?




I do incorporate VSA but that can be done with any chart. Visually, I prefer Tradeguider. Finding these setups doesn't involve VSA per se. I do look for a big increase in volume though


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## Shaker (21 October 2013)

Nice thread Pav

SDL did travel well today hitting .13c late in the day.
Do you scan for sub 10c stock with volume then eyeball for your watchlist?

Shaker


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## pavilion103 (21 October 2013)

Shaker said:


> Nice thread Pav  SDL did travel well today hitting .13c late in the day. Do you scan for sub 10c stock with volume then eyeball for your watchlist?  Shaker




Yeh I'm daily scanning and adding to the watchlist. Basically looking for high volume, as you said.

I might go into my setups in detail at some point. A few basic principles that I've developed that seem to go well. 

I take setups for these in a different way than I take the 11c-$1 stocks.


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## kid hustlr (22 October 2013)

Pav, perhaps I missed it but could you go into a little more detail about your exit strategy/stop management.

My understanding is you are going to try to move the stop to b/e quite quickly in order to eliminate risk, yet would I be correct in saying that if one of these happens to go your way you will trail the stop quite loosely in order to give it plenty of room for the big home run?

SDL is a good example, obviously quite a bearish day today, were you stopped out or are you still in this trade?


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## pavilion103 (22 October 2013)

*SETUP*




- - - Updated - - -



kid hustlr said:


> Pav, perhaps I missed it but could you go into a little more detail about your exit strategy/stop management.
> 
> My understanding is you are going to try to move the stop to b/e quite quickly in order to eliminate risk, yet would I be correct in saying that if one of these happens to go your way you will trail the stop quite loosely in order to give it plenty of room for the big home run?
> 
> SDL is a good example, obviously quite a bearish day today, were you stopped out or are you still in this trade?




I'll post up all my trailing stops so SDL definitely still in. 

Exactly correct. I will be moving to BE quickly and then trailing loosely, hoping to give it room to have a big move!


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## pavilion103 (22 October 2013)

*SETUP*


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## pavilion103 (23 October 2013)

*SETUP*


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## burglar (23 October 2013)

pavilion103 said:


> ... I do look for a big increase in volume though




Some of these companies have billions of shares on issue.
So how do you (or program) decide the volume is high?


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## pavilion103 (24 October 2013)

burglar said:


> Some of these companies have billions of shares on issue. So how do you (or program) decide the volume is high?




Mainly working with relatively high volume over an extended period


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## burglar (24 October 2013)

pavilion103 said:


> Mainly working with relatively high volume over an extended period




Ah, yes! I see now you have some sort of Moving Average line in the Volume part of the chart.


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## pavilion103 (24 October 2013)

burglar said:


> Ah, yes! I see now you have some sort of Moving Average line in the Volume part of the chart.




I don't really pay much attention to that though. It's more a matter of eyeballing it. If it stands out like the proverbial than I'll look at the stock in more detail and see if it's suitable


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## CanOz (24 October 2013)

This is an off topic post...

Love the avatar!


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## pavilion103 (24 October 2013)

CanOz said:


> This is an off topic post...  Love the avatar!




Haha thanks.  It's an app called Bitstrips. You can make one of yourself, put yourself in comics. If you have friends who have made one too you can put them in the comics with you. It's hilarious!


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## CanOz (24 October 2013)

Hehe. Thanks for that Pav, it was a nice diversion this morning.


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## pavilion103 (24 October 2013)

CanOz said:


> Hehe. Thanks for that Pav, it was a nice diversion this morning.




Awesome


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## pavilion103 (24 October 2013)

*SETUP*


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## pavilion103 (24 October 2013)

A couple of the entries and exits have been changed based on today's trading. 

SETUP 4 - buy 0.092, sell 0.076
SETUP 6 - buy 0.041, sell 0.024

- - - Updated - - -

I also just want to reiterate that I am far from an expert with this sort of trading strategy and I am just as curious about the results as others are. 

I am open to discussing any opinions, objections and anything else people have in regards to this approach.


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## skyQuake (24 October 2013)

pavilion103 said:


> A couple of the entries and exits have been changed based on today's trading.
> 
> SETUP 4 - buy 0.092, sell 0.076
> SETUP 6 - buy 0.041, sell 0.024
> ...




Hey Pav, with say setup no.6, have you considered buying support at 2.5, and setting stop a few ticks away? 
Or are you only interested in buying the breakouts?


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## fiftyeight (24 October 2013)

Setup 8, was the buy on the 21st?


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## burglar (24 October 2013)

pavilion103 said:


> ... I am open to discussing any opinions, objections and anything else people have in regards to this approach.




You are not dealing with traders nor investors when you buy these stocks.
You are competing with gamblers (or more politely, entrepreneurs and speculators)!


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## craft (24 October 2013)

CanOz said:


> This is an off topic post...
> 
> Love the avatar!




Me too

except:  the official traders winter uniform is a t-shirt, trackies and uggies and the summer uniform is singlet, stubbies and thongs - which leaves me wondering whether your avatars are off to a wedding or a funeral


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## CanOz (25 October 2013)

craft said:


> Me too
> 
> except:  the official traders winter uniform is a t-shirt, trackies and uggies and the summer uniform is singlet, stubbies and thongs - which leaves me wondering whether your avatars are off to a wedding or a funeral




Trying to make a good impression here Craft

Hey, at least I'm just a blue blazer and collar...


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## pavilion103 (25 October 2013)

burglar said:


> You are not dealing with traders nor investors when you buy these stocks. You are competing with gamblers (or more politely, entrepreneurs and speculators)!




Yes this is a very speculative approach. That's why I suggested a small allocation of capital and a system to be traded as a side account.

It will be interesting to see how this goes. I may have to add some additional criteria to some of these stocks.


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## pavilion103 (25 October 2013)

craft said:


> Me too  except:  the official traders winter uniform is a t-shirt, trackies and uggies and the summer uniform is singlet, stubbies and thongs - which leaves me wondering whether your avatars are off to a wedding or a funeral




I wouldn't have made it to the cover of time magazine in trackies


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## pavilion103 (25 October 2013)

skyQuake said:


> Hey Pav, with say setup no.6, have you considered buying support at 2.5, and setting stop a few ticks away? Or are you only interested in buying the breakouts?




Yes certainly a consideration. I can see the enormous upside in getting in near support and having a tight stop. If it takes off the profit would be huge. On the other hand I'd be copping a lot of 1R losses.
Also tighter stop would mean a larger position size using fixed fractional, meaning I can take fewer trades.

The question is do I want my capital in, say, 10 stocks or 3 or 4 (or fewer)?

The idea of the tight stop appeals to me very much, maybe to be used when there is a stronger defined support? I don't know. But for the purpose of this I want to try and get on as many as possible, eliminate the initial risk (BE stop) and then hope for the next SIR (well maybe not exactly).

Having said that, don't be surprised if you do see one of those tight setups soon! Love your thinking.


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## burglar (25 October 2013)

pavilion103 said:


> Yes this is a very speculative approach. That's why I suggested a small allocation of capital and a system to be traded as a side account.
> 
> It will be interesting to see how this goes. I may have to add some additional criteria to some of these stocks.




Yes! I was suggesting that the "patterns" of trading would be different.

You are swimming with sharks; not grazing with sheeple!


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## sammy84 (25 October 2013)

pavilion103 said:


> The idea of the tight stop appeals to me very much, maybe to be used when there is a stronger defined support? I don't know. But for the purpose of this I want to try and get on as many as possible, eliminate the initial risk (BE stop) and then hope for the next SIR (well maybe not exactly).




Good thread so far. I have traded a similar system for the last few years. As a side account also.

It has been running hot lately (MKB, RIA, SDL etc) but there can be many months where nothing happens.

My learnings so far with trading small caps-

Keep a very wide stop (~30%). A lot of manipulation goes on with these stocks and they don't always move as expected.
Take profits when they're there - if a stock moves >10% in one day I normally take my small profit and move on. I like this system to take a whole a lot of small profits rather than one big one. I think the key with small caps is capitalising on the initial euphoria (often short lived) of the punters, gamblers who seem to like these stocks. One of the places I search for potential set-ups is on hot copper's most talked about stock list. It's those stocks which get the short term traders irrational traders who jump on trends.
Another reason I like to be out quickly is that too often when price parabolically moves up, a capital raising is around the corner. 
This system is probably always best as a side system. Volume whittles always too quickly with these stocks that I need to accept that there may come a time that there is not enough volume to exit any of my position. Hard to scale such a system.


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## burglar (25 October 2013)

sammy84 said:


> ... My learnings so far with trading small caps- ...



Hi sammy,
You say it so much better than me!


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## pavilion103 (25 October 2013)

Appreciate the thoughts of people that have been here before!

I'm guessing plenty will be learnt through this exercise. I may come out of it with similar sentiments. We'll see!


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## burglar (25 October 2013)

sammy84 said:


> ... Another reason I like to be out quickly is ...




The words Deft and Nimble come to mind.

Deft:
    adept
    adroit
    nimble

Nimble:
    agile
    deft 
    lithe
    lively


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## pavilion103 (26 October 2013)

*SETUP*


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## pavilion103 (26 October 2013)

Current setups (some changes)

3 - 0.040, 0.024

4 - 0.021, 0.013

5 - 0.092, 0.076

6 - 0.036, 0.022

7 - 0.068, 0.057

8 - 0.098, 0.008

9 - 0.028, 0.021


A good number of setups. Hopefully some action soon.


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## pavilion103 (27 October 2013)

SETUP







With these entries I use a buy-stop to enter but also put in a limit entry price a few ticks away incase it jumps a bit on open.

- - - Updated - - -



fiftyeight said:


> Setup 8, was the buy on the 21st?




These are buy-stop entries so Setup 8 has not yet been triggered.


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## pavilion103 (29 October 2013)

Some adjustments to be made to setups. 
Don't have the time at the moment. 

Will post an overall position update at the end of the week too.


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## Rider (29 October 2013)

Hey Pav and all, interesting thread Pav and thanks for sharing

I am pretty new to trading and just want to know as to why trading in these stocks is considered gambling? 

that may be a silly question to more experienced traders but taking Pavs example for instance, he has a pre defined risk in his trades and set an initial stop. He has also recognised a pattern and wants to trade to his advantage.

So Pav and others do you think you can trade these types of stocks and stay on the profitable side of the expectancy curve? or should they stay a play thing, some of these stocks have a lot of volume going through them so someone must be using them.

Rider


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## burglar (29 October 2013)

Rider said:


> ... just want to know as to why trading in these stocks is considered gambling? ...




pav is just one trader, many others in this zone are not using his sensible approach.
I would suggest that you need to learn a lot to venture here.

It is a high risk/high reward environment.
Even pav will risk only some of his portfolio here.


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## pavilion103 (30 October 2013)

I wouldn't recommend it for the new trader.

I've seen people who will put $5000 or $10000 in one of these stocks hoping it will go up, with no plan of exit, because they get starry eyes by the potential for huge gains. The home run. 
Things can go wrong very quickly in these.

As said above, a sensible approach is needed with strong risk management. Some of my speculative calls above make it sound so lucrative but these sort of trades are exceptionally rare. You need a lot of patience and discipline in order to put yourself in a position to benefit from them.

They are also less predictable. That's why I devote the majority of my money to the momentum strategy where it is much easier to discern price action and achieve a more predictable return than these ones.

I would only use a small percentage of my money for a strategy like this for the above reasons.

I have no doubt it can work but you'd want a solid plan, mindset and wouldn't want to put all your eggs in this basket.


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## galumay (30 October 2013)

pavilion103 said:


> Current setups (some changes)
> 
> .....
> 
> ...




Looks like a bit much spread on setup #8!


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## burglar (30 October 2013)

Rider said:


> ... considered gambling? ...




Take the race track.
Some make income, some fees and a few win prizes.
The bookmaker has positive expectancy!
The aficionado does much homework.

But the (irrational) punter is the driving force.
That is why horse racing is considered gambling.


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## pavilion103 (30 October 2013)

I've had some really good trades recently in the 20-50c range actually. I try not to take too many but seems to be working at the moment.


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## Craton (30 October 2013)

Pav, hope you don't mind. It seems like a full time job to me so am assuming you are a day trader. If not, how much time do you invest in scanning the charts per day?

Really enjoying this thread BTW.


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## pavilion103 (30 October 2013)

Craton said:


> Pav, hope you don't mind. It seems like a full time job to me so am assuming you are a day trader. If not, how much time do you invest in scanning the charts per day?  Really enjoying this thread BTW.




Nowhere near as much time as you'd think.  I am not a day trader, although some nights I log on to the FTSE futures for a bit.  It takes less than one hour every night to do scans, pick prospects, place trades and amend stops on existing trades. Most nights it is closer to 30 mins. I don't have to check them during the day at all if I don't want.  

The most appealing thing about trading is this: put in a couple of thousand hours of study early on and then once you learn how to do it you can develop a strategy that is not time intensive. 

That's my kind of investment. Hard work early on and then ride the benefits for life. I continue to learn though of course.  I'm all about efficiency. Maximum results for as little time commitment as possible. Very happy with this situation.


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## Craton (30 October 2013)

Thanks for the reply, all understood and nice one in that you certainly live by one of the old adages that are part of my mantras, namely, "work smarter not harder". I like it.

To my next question. I'd assume that one needs some sort of charting s/ware to see the Set Ups materialize or would the online (Comsec/Etrade) brokers offerings be enough?


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## Rider (30 October 2013)

burglar said:


> Take the race track.
> Some make income, some fees and a few win prizes.
> The bookmaker has positive expectancy!
> The aficionado does much homework.
> ...




Burglar I'm interested in your experience with sub 10c stocks or small cap stocks in general ( have you dipped your toe into the Shark pond?)


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## pavilion103 (31 October 2013)

New setup





*Updates:
Setup 6 - cancelled
Setup 10 - cancelled*


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## pavilion103 (31 October 2013)

Craton said:


> Thanks for the reply, all understood and nice one in that you certainly live by one of the old adages that are part of my mantras, namely, "work smarter not harder". I like it.
> 
> To my next question. I'd assume that one needs some sort of charting s/ware to see the Set Ups materialize or would the online (Comsec/Etrade) brokers offerings be enough?




Yeh you want some sort of charting software to run scans, do analysis on etc. 

Good value for money imo is Amibroker. Check out there website. They are one of the ones I have.


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## pavilion103 (31 October 2013)




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## pavilion103 (31 October 2013)




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## pavilion103 (2 November 2013)

Here is the summary. Three stocks in the portfolio now.


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## pavilion103 (2 November 2013)

Here are the three updated charts. 

PAA is the new entry (Setup 11). Not off to the best start with that reversal on the entry day. 

Also note that the original intended entry was 0.014 for this one but I had a limit of up to 0.016. This means that the intended number of shares for 0.014 was taken for 0.016, meaning that instead of $400 risk, there is $600 risk. 
This is one issue that I can already see occurring with poor entry likely for some of these. I don't hide this fact.


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## wombat40 (2 November 2013)

Oh no..not pharmaust, ive been in that since day before 9/11...a real dog !!


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## kid hustlr (3 November 2013)

Loving the detail you are putting into this Pav, very interesting. I see you're also slowly mastering excel, colours everywhere!

I'm really worried SDL is just going to drift back to sleep and you will have let a 5 bagger go. All part of the learning process for now I guess. Hopefully I'm wrong.


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## pavilion103 (3 November 2013)

kid hustlr said:


> Loving the detail you are putting into this Pav, very interesting. I see you're also slowly mastering excel, colours everywhere!  I'm really worried SDL is just going to drift back to sleep and you will have let a 5 bagger go. All part of the learning process for now I guess. Hopefully I'm wrong.




I'm thinking maybe the same thing mate. But I put these rules in place before I started and the objective isn't to pick up 5R. It's to nail a big one. However I will trail stops. I don't want it to be all or nothing. But they will be widish. 

This is going to be a medium term project and it won't be until at least 3-6 months that anything will really be deduced in terms of the effectiveness of this portfolio. It may even be 12 months.
Unless of course the account begins to grind down to a point that it is too difficult to recover. I'm at interested as everyone to see how this goes. It's not how I normally trade but worth playing around with IMO.


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## pavilion103 (4 November 2013)

SETUP 9 - GGX triggered @ 0.029, we wanted 0.028 - the risk is $229

SETUP 12 - CVN triggered @ 0.079, we wanted 0.078 - the risk is $222


I won't updated charts every night. 

All will be done at least once a week in a summary 
OR
when there is big movement.


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## mr. jeff (5 November 2013)

wombat40 said:


> Oh no..not pharmaust, ive been in that since day before 9/11...a real dog !!




Would you kindly contribute to the conversation in a more constructive manner.

It may be unfortunate that PAA has not performed in the past, however this does no have any bearing on the technical analysis of the stock. It is not respectful, particularly of this thread, to place an emotive comment about a selected stock when it is clear how the decision was made and why. 

You should say "PAA is a dog because their new strategy to put new drug XXXX into the market relies on......" 

I am sorry to be pointed. Apologies and please carry on with the great posts everyone.


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## tech/a (5 November 2013)

pavilion103 said:


> SETUP 9 - GGX triggered @ 0.029, we wanted 0.028 - the risk is $229
> 
> SETUP 12 - CVN triggered @ 0.079, we wanted 0.078 - the risk is $222
> 
> ...




CVN seems to have traded at a high of .028c


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## pavilion103 (5 November 2013)

Do you mean GGX?

On IB this is showing up as a buy at 0.029 for me.


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## tech/a (5 November 2013)

pavilion103 said:


> Do you mean GGX?
> 
> On IB this is showing up as a buy at 0.029 for me.




Sorry Right Code wrong Price
.078 --CVN


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## skyQuake (5 November 2013)

pavilion103 said:


> Here are the three updated charts.
> 
> PAA is the new entry (Setup 11). Not off to the best start with that reversal on the entry day.
> 
> View attachment 55079




Hey pav, my chart for PAA looks a bit different.  Looks like some ticks are missing from your chart?


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## pavilion103 (5 November 2013)

One more with a wider stop this time.


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## Boggo (5 November 2013)

That popped its head up in my weekly speccy scan last Fri. It had a nice run when it last broke 10c.

(click to expand)


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## curiost (6 November 2013)

I've been following this thread with much interest, but I have a (possibly silly) question. How are the setups entered? At some predefined amount above the price on the day of high volume? What is the advantage of this if there is an uptrend, over just buying on the day of high volume?

On the first read of this thread I thought that each setup was an entry, but then your trade spreadsheet only has a few entries. I'm relatively new to trading so please be nice


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## tech/a (6 November 2013)

pavilion103 said:


> One more with a wider stop this time.
> 
> 
> View attachment 55129






Boggo said:


> That popped its head up in my weekly speccy scan last Fri. It had a nice run when it last broke 10c.
> 
> (click to expand)




There is a real art to these and if you do it correctly you can have very busy days trading.
Chart 14 *PAV*
Your entry is too late and spread to wide---you need to be on the first break of the high of the previous bar.(In my view)
*BOGGO* your chart.
I know its just a weekly scan and your not trying to time these.
I will point out that the stock has had over 100% rise already.
Difficult to find EARLY prospects and the trading in and out to get set can be frenetic but worth the effort to learn.

You need LIVE data and a good platform.
You need to hit them hard when running Pyramid and take at least 50% off when they pause.
Sell when they reverse hard and hit again if they second run---often HARDER.

*HINT 1*
There will be a REASON WHY these types of stock take off.
*HINT 2*
Often that reason wont become apparent until a day or two after the impulse move takes off.
So getting set in anticipation is wise.
*HINT 3*
GAPS are your friend learn how to play them.
*HINT 4*
Become an instant decision maker --- procrastination will kill you!
*HINT 5*
You are trading emotion---if you understand that---you will be 100% smarter than your competition (Those you are benefiting from that are also trading the small cap).

There is more but need to keep some to myself!
I'm competing against you!.


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## burglar (6 November 2013)

tech/a said:


> ... *HINT 3*
> GAPS are your friend learn how to play them. ...



Agree wholeheartedly.
But do not understand HINT 3 in its entirety.
Perhaps you could elaborate (if it doesn't kill your positive expectancy)


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## pavilion103 (6 November 2013)

Obviously a lot for me to learn. 

Obviously I'm not trading these in the absolute best way possible.

I want to learn that. 

Having said that, this strategy I am proposing is not about getting in and out of stocks. It is not about maximising each profit with active trade management. It is about a medium term strategy, which aims to hold a number of these stocks, hopefully eliminate risk (stop to BE) and let them run. 

Setup 14 - Yes it has moved. Yes I would have wanted to be on already. Yes it may not be a great entry - initial stop too wide. But I don't know what it can do. Will I maximise profit on this one position if it takes off - NO. Will I still do ok - YES. 

The unintentional benefit of the wider initial stop is it allows me to take a smaller position size, thus hold more stocks in my portfolio. If (big if) if happened to reach the heights of 40c again, it would still be almost $5,000 profit from $400 risk. Even at 25c it would be around $2,500. Or it could be break even. Or it could be a $400 (1R loss). 

Tech - I have recorded everything you've told me in here and in emails and will study it diligently. 

In the meantime, I still believe this strategy can be very profitable, even if it has not been absolutely maximised. 

I am aiming for a passive approach with as little ongoing effort as possible.


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## craft (6 November 2013)

pavilion103 said:


> I am aiming for a passive approach with as little ongoing effort as possible.




Then start looking for a tail wind. 

I’m guessing that if you owned all these sub 10c stocks and coughed up all the capital they consume they as a whole would cost you money not make you a return.  On the whole the underlying performance from the basket of business creates a head wind.

The size of the companies causes illiquid conditions when excitement wanes – hence slippage, another head wind.

The size of the companies makes them prone to manipulation and abnormal moves – additional offside calls and more potential slippage – more head wind.

Trading costs – always a headwind.

Can you trade well enough to make head way into these head winds? Even if you can trade that well why not trade with a tail wind?

Small risk – high payoff is the attraction.  Same attraction with Lotto, but it’s probably easier to see the drain on the pool before winnings are allocated.

I would have thought the best expectancies in this area would be taking small bites against those buying and hoping to win big.

What should the aim of the professional trader be – to get lucky or to get on with business? Are you the casino or are you the patron.

If ever you should have your trading thesis fully validated before putting money down it should be in this highly negative sum environment.

Just some random thoughts – haven’t read the whole thread so sorry if they are not applicable or you have already covered/considered.


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## pavilion103 (6 November 2013)

Thanks for the thoughts.

I appreciate the thoughts of everyone, I am a very teachable and open person and take it all on board without offense. I like good feedback. Otherwise my posting in a public forum is a waste if my time.

At the same time I couldn't care any less if people think this approach will fail. That means nothing to me. I've studied, I've researched, I believe I am playing the probabilities. 

Time will be the most important judge of this system.


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## McLovin (6 November 2013)

craft said:


> Then start looking for a tail wind.
> 
> I’m guessing that if you owned all these sub 10c stocks and coughed up all the capital they consume they as a whole would cost you money not make you a return.  On the whole the underlying performance from the basket of business creates a head wind.




I've only been briefly following this thread, but the idea that you could hold these over a medium time frame, without the underlying business at least becoming profitable and still make money seems like wishful thinking. From my own anecdotal observations, these stocks can go up 100% based on an announcement of not much substance (GoConnect for example). Invariably, reading the other forum you'll see plenty of true believers pushing the stock up, eventually they get bored and move on to the next big thing.

If you want something passive, trading pico-cap capital killers isn't the way to do it.


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## pavilion103 (6 November 2013)

My thinking is that I'd need very few to really hit it big. Most will do nothing.

In the meantime I will be reducing risk as I go.

We'll see!


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## peter2 (6 November 2013)

Pav: Your idea has merit and is similar to many portfolio strategies which rely on a few large results from many trades to produce the return. I doubt that this strategy is low activity as you'll have to place/cancel many conditional orders while waiting for your entries. Of course this can be done in your own time when the market is closed. 

Your chart setups remind me of the box theory. The boxes provide a reasonable entry mechanism and define an initial SL which allows you to control your risk. You can place your buy stop (conditional order to buy the new high) well before it triggers. If the price falls and closes below the box bottom you can cancel the order and wait for another price/vol spike box. As you are targeting the sub 10c stock universe you will probably have to place and then cancel many orders before starting a trade. Buying new highs will avoid many of the "pump and dump" price/volume spikes which are very common in this section of the market. 

This is the AHZ line chart and shows four boxes (pump and dumps) that did not trigger an entry. An entry was triggered in the 5th box when price broke through the top. Note: The sixth box also triggered an entry even though price did close below the box. No entry if you had cancelled your buy stop order though. Will you pyramid if subsequent box tops are broken?

I think the hardest part for you might be the trade management after the entry. We know that AHZ has hit 0.15 which would be +500% from an entry ~0.03. A good result but how many good results do you need to make up for all the losses?  The swings in these stocks are very volatile and if you are distracted by work or life you may miss opportunities to lock in some profit. How will you react when seeing a +200% result slip back to break-even? How will it affect your long term outcome? 

The big Q is, can you create a big enough edge that will make it worth your time and effort?


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## burglar (6 November 2013)

craft said:


> Then start looking for a tail wind ...




If, by tail wind, you mean the direction of the market, I agree entirely.

In a bull market, I win. 
Then the market turns against me.
I lose it all again, and then some!

The next bull comes around.
I have to make up the shortfall first.

Richard Farleigh says there are times when it is best to be out of the markets.
As he and I don't fly in the same social circles, I need to figure it out for myself.

I am hoping that I have learnt sufficient to be nimble.
I feel that now is the right time to be getting in! (dunno? gut-feel!)


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## pavilion103 (6 November 2013)

I will endeavor to get back to all posts soon. I am out tonight. 

I am coming to the realisaton that I like some of my setups more than others. 

There are some very clear ones that I have seen work well and that I really like. 
There are others that I am hitting and hoping with a little more. 

I will elaborate more maybe tomorrow night or on the weekend and get people's thoughts. 

Definitely the box stuff mentioned in one of the posts is a part of this.


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## CanOz (6 November 2013)

Seems like you could use a filter of some kind? Some of the symbols have volume so low it must be difficult to determine any goings on....Is there a fundamental filter you could add? Just thinking out loud really...

Is this price action caused by the punters as McLovin is eluding to? Is it a result of prior accumulation?

Interesting thread none the less.


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## McLovin (6 November 2013)

burglar said:


> If, by tail wind, you mean the direction of the market, I agree entirely.




I think craft means to have the underlying business as your tailwind, not the market. So if you have a company that is reporting increasing revenue/profit etc it's much easier to be passive because the business is doing the heavy lifting for you. You put the work in upfront and then you check back every 6 months to make sure it's still doing what it should do. That's passive, imo.

Take MNW, revenue of <$1m but a mc of ~$130m. It won't take a lot to see that sp halve or worse.

Full disclosure: I know sweet FA about TA.


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## tech/a (6 November 2013)

McLovin said:


> I think craft means to have the underlying business as your tailwind, not the market. So if you have a company that is reporting increasing revenue/profit etc it's much easier to be passive because the business is doing the heavy lifting for you. You put the work in upfront and then you check back every 6 months to make sure it's still doing what it should do. That's passive, imo.
> 
> Take MNW, revenue of <$1m but a mc of ~$130m. It won't take a lot to see that sp halve or worse.
> 
> Full disclosure: I know sweet FA about TA.




True
But after the MYOB announcement it rose 20 x it's price.
Fundamental announcement ( low pressure system )
Crowd psychology pushed ( cyclone )
All recorded on a chart.


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## burglar (7 November 2013)

tech/a said:


> True
> But after the MYOB announcement it rose 20 x it's price.
> Fundamental announcement ( low pressure system )
> Crowd psychology pushed ( cyclone )
> All recorded on a chart.






> 20/08/13: MYOB Signs Five Year Agreement with Mint Wireless


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## McLovin (7 November 2013)

tech/a said:


> True
> But after the MYOB announcement it rose 20 x it's price.
> Fundamental announcement ( low pressure system )
> Crowd psychology pushed ( cyclone )
> All recorded on a chart.




No doubt and if you can trade it then that's great. But the fact that the price rose 20x based on a three sentence announcement tells you the kind of buyers you're dealing with; traders and dreamers. It's just hard to see how that could become a passive investment. You might get lucky once or twice, but you'd need some pretty big wins to cover all the inevitable losses.


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## pavilion103 (7 November 2013)

Yeh. I'm not thinking completely passive.

If it goes from 5c to 20c or 30c. I'll be looking to trail stops. Sometimes close, sometimes some room depending on behavior. I won't be letting it run and giving back all the profits.

My point is I won't be actively trying to get out of each one after a big up day and will risk giving back a portion of profit for the chance of allowing a bigger move.

Happy for more input with this as we go. Don't think I'm just holding these, never moving my stop and hoping one takes off and giving up on all the others. I'm just allowing them more room to move than I would with the momentum strategy.


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## tech/a (7 November 2013)

PAV 
This is the sort of trading which is close to pure momentum.
Pretty well most discussion here has been on entry.
The real money is made on the exit.

Trailing a wide stop will frustrate you to death!


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## odds-on (7 November 2013)

McLovin said:


> I've only been briefly following this thread, but the idea that you could hold these over a medium time frame, without the underlying business at least becoming profitable and still make money seems like wishful thinking. From my own anecdotal observations, these stocks can go up 100% based on an announcement of not much substance (GoConnect for example). Invariably, reading the other forum you'll see plenty of true believers pushing the stock up, eventually they get bored and move on to the next big thing.
> 
> If you want something passive, trading pico-cap capital killers isn't the way to do it.




Hi Pav,

Anthony Bolton, the Fidelity fund manager, whose approach was FA based uses TA in his investment decisions. For large cap companies, he advises that due the sheer number of factors that affect the valuation of a large cap, the retail investor is at a great disadvantage and is probably better off using TA to enter/exit. For a less active approach than your current approach, why not just consider a large cap TA system?

I found this a refreshing read -   “Why I am not a value investor” - http://guythomas.org.uk/blog/?e=27

Cheers


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## tech/a (7 November 2013)

Good read.


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## pavilion103 (9 November 2013)

Updates. Summary plus open trades. 

CVN was stopped out on 7/11/13 for a $456 loss. The only closed position. 

Updates to the pending order setups will be posted over the weekend too. 

I am considering having fewer setups and being more selective. Also considering capping the portfolio at a certain number of stocks at any one time. Maybe 5 or 6.


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## pavilion103 (10 November 2013)

The only active setups are

Setup 4: 0.021, 0.012
Setup 13: 0.025, 0.015

The rest have been cancelled. Some put back on the watch list.


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## pavilion103 (10 November 2013)

This is the type of setup that I have found to be very effective in my testing. 
This is one that has recently moved - SEN
I like to see some movement. Then price flattens and a range forms. 
I then like to enter on the break above this range. 
This will often allow us to capture the first BIG break, without waiting until after it has occurred. 

There are others like this. Let's see if we can identify some in real time.


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## Rider (10 November 2013)

Real time, does this look like a good setup? from 3 to 5c last week, huge volume on Friday to cap off a massive week.

Good time to enter or missed the run?

Can post the Ticker if allowed, not sure on the rules 

Daily



weekly


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## pavilion103 (10 November 2013)

Too late now. 

But an example of what I'm looking for.

I've seen many similar ones take off.

Less than 1c on the initial risk.

For me these are my favourites.


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## pavilion103 (10 November 2013)

Oh sorry that's a different one!

I was looking over that stock earlier. It's on the watch list.

Admittedly I would not have got on this one in real time. There was no setup that I liked. So wouldn't have entered it.

Nice profit for those who did though!


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## Rider (10 November 2013)

This is what SEN looked like when it first took off. It then traded for 6 or 7 weeks between .02 and .028 and now at 
.056
out of interest would this have been a setup you like?




You are saying you want to catch these early but I'm not sure how you can identify which ones will take off and which ones will fail. Do you look for conformation of buying in the charts? 
It seems to me you just have to trust your instincts, do a bit of research into what your investing in. Have a solid trading plan and have a go.


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## Rider (10 November 2013)

Rider said:


> Do you look for conformation of buying in the charts?






pavilion103 said:


> I then like to enter on the break above this range.




Sorry pav just went back over your post, this is exactly what you are doing... oops


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## pavilion103 (11 November 2013)

GRR this one is annoying. 

ADO. 

This is the chart exactly as it was in my watch list last week. Untouched the analysis since then. 

I didn't include it due to the number of setups we already had. 

May have been a handy addition had I taken it!


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## pavilion103 (11 November 2013)

SETUP


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## pavilion103 (12 November 2013)

SETUP


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## pavilion103 (12 November 2013)

TRIGGERED


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## pavilion103 (12 November 2013)

Interesting

ADO - the one I said we missed out on. Reversed after hitting 10.5c. Will be interesting to follow. 

SEN - the case study above also. Continues to move up. Hopefully we can get on one like this. If we were in it would be at around $2,500 profit at the moment.


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## pavilion103 (12 November 2013)

Guys, from next Tuesday I will be in India for 2 weeks.

Luckily this strategy doesn't require a whole lot of stop movement.

I have decided to simply let whatever active trades are in the portfolio run after next Monday evening's adjustments.

I won't be checking anything while over there so hopefully a pleasant surprise upon return home. I find with these ones anyway looking at prices day to day is so tedious. But looking at them after 2 weeks could be quite exciting. Obviously it's necessary to update daily usually. Just not terrible exciting.


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## Country Lad (13 November 2013)

From the SEN thread as this post is more about the sub 10 cents than SEN:



pavilion103 said:


> Is anyone else in this one? If so why? FA or TA?




Three reasons:

First.  Normally I don’t go much for the “cheapies”.  Although I am quite happy with the system I have been successfully using for yonks, I followed your sub 10 cents game for a little while and noticed that there were quite a few cheapies starting to wake up.

Secondly, IT was one of the sectors very buoyant. Both the NASDAQ and our XIJ was rising nicely.

Thirdly was TA. SEN had my favourite setup at around 2.7 cents and the break from the P&F pattern was too tempting and I bought a smaller than my normal parcel at 3 cents, expecting to sell soon after or be stopped out.  Still in and now a bit annoyed I did not buy my normal sized parcel, but I normally don’t indulge in “cheapies”.

There were clear buy signals at breaks through 3.5 and 5.2 which unfortunately did not tempt me either.






There were a few others I played with and either sold or was stopped out or didn’t buy which had similar setups:  AUQ, DTQ (which is again building to a similar setup if it breaks 6.3), TAW, IMC (probably the lowest priced one I have ever bought), and PAB.

Pav, even though my setups are very different to yours and I set stops differently, this topic has certainly made me reconsider my aversion to “cheapies” after playing with a few.  It could be fun playing with these.

Cheers
Country Lad


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## tech/a (13 November 2013)

250% right there with SEN

It's fun when you get on one.
When you really trade them you'd e belting the two 
Clear pyramid plays.

Sure you get stopped out of many ( see the other exercise on keeping 
Your capital ---- not you CL you know how ) 

Get one of these and it can be fun and lucrative.


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## pavilion103 (13 November 2013)

tech/a said:


> 250% right there with SEN  It's fun when you get on one. When you really trade them you'd e belting the two Clear pyramid plays.  Sure you get stopped out of many ( see the other exercise on keeping Your capital ---- not you CL you know how )  Get one of these and it can be fun and lucrative.




Exactly my thoughts. Clear pyramid opportunities to hammer on that chart. I will be looking to do that in this exercise too.   

Hit them hard and really make the winners count!

Will be interested in the stats of this exercise when we have a decent sample size over 6 months to a year.


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## pavilion103 (13 November 2013)

CL I used to look at these when I first started and then Tech showed me the momentum strategy he uses and I put these aside. Ultimately it's the momentum strategy that will provide me with the more consistent returns so warrants more of my attention. 

Coming back to these, I have done so cautiously and with a bit of skepticism. But seeing the potential I definitely consider it worth a small portion of my capital. It's a bit of fun also. I also believe it can be profitable. It's been fun getting back into some of these.


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## tech/a (13 November 2013)

pavilion103 said:


> Exactly my thoughts. Clear pyramid opportunities to hammer on that chart. I will be looking to do that in this exercise too.
> 
> Hit them hard and really make the winners count!
> 
> Will be interested in the stats of this exercise when we have a decent sample size over 6 months to a year.




To be blunt you'll only get on a few a year.
I've had about 5 in 20 I reckon.
Ones that I've started with 100000 and finished with around a million 
over a week then got out!

One I remember vividly went from 5.6c to 10c in a day.
I had a sell at 10c which I kept changing as I kept buying.
made over $20k that day--nice! once in 20 yrs.


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## pavilion103 (13 November 2013)

Yeh I don't doubt it Tech. 

From day 1 in here I've never made this out to be the holy grail of low risk and high returns. It isn't. It's risky. It's unpredictable. Not many will take off. But then again it might not take many to make a profit.

That is a good pay day! I hope for a similar one!!


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## tech/a (13 November 2013)

pavilion103 said:


> Yeh I don't doubt it Tech.
> 
> From day 1 in here I've never made this out to be the holy grail of low risk and high returns. It isn't. It's risky. It's unpredictable. Not many will take off. But then again it might not take many to make a profit.
> 
> That is a good pay day! I hope for a similar one!!




I use the very tight stop method of risk mitigation used in the other thread to "Live another day!"


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## pavilion103 (13 November 2013)

I am considering tighter entry on fewer stocks. Then is also have a tighter trailing stop. 

I want to test this.

Many more losses. But some HUGE profits. Especially if pyramiding.

I think this can work (occasionally lol)


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## pavilion103 (13 November 2013)

CNX - trading halt 

Could be good for us. We'll see


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## pavilion103 (13 November 2013)

Some shortfall. That word doesn't sound promising. Not sure what impact this will have.


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## tech/a (13 November 2013)

pavilion103 said:


> I am considering tighter entry on fewer stocks. Then is also have a tighter trailing stop.
> 
> I want to test this.
> 
> ...




Have a trailing stop but ALSO have a price sell order at a spike level.


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## pavilion103 (13 November 2013)

What about one like SEN? Wouldn't having the sell limit take us out early without chance to let it keep going?


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## pavilion103 (13 November 2013)

Or is that only for larger price spikes?


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## pavilion103 (13 November 2013)

SETUP 16 - cancelled - STE


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## pavilion103 (15 November 2013)

Didn't get the chance to post up the chart of ADO that we were following.

This was the one that we DIDN't take. 

Setup was about 7.5c with stop 6.5c
Up to 11c this morning with an explosive week. 
Interesting to track this, as these are the types of ones we are looking for.


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## pavilion103 (16 November 2013)

Here is the weekly summary. 

The only 2 setups are:
Setup 4
Setup 14

I will be going to India for 2 weeks, so will probably not be back until just under 3 weeks. 

I will leave the active ones going, with those 2 setups in place also. 

So far is is fairly non-eventful. SDL is going well and with this consolidation I am hoping for a break to the upside to the target of around 21c. That would be a great result if it can breakout of this consolidation. 

Disappointed to miss out on the ADO one. It has taken off.


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## pavilion103 (31 December 2013)

Just remembered this thread when I saw it advertised on the home page!!!

India really distracted me. The last post was before I left. 

I just had a look at the open trades and non of them have performed. 
I'll have to update the spreadsheet (will all be losses), so that at least the records are accurate. 


With the increased focus that I'm putting on my futures trading, I'm not sure that I have the time or inclination to continue on with this project at the present moment. It's definitely something I would like to revisit, but I need to devote my time to futures for now.


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## pavilion103 (8 January 2014)

I thought rather than trading the portfolio which I don't have time for, I can still post any relevant trades/discussion etc for sub 10c stocks. 

I haven't looked at them at all, but if I get time to do a quick scan from time to time I'll post. 


A bit of an embarrassing situation. 
I didn't realise that I still had a buy order for GGX in my real account. It was triggered a couple of days ago. 
Bought 2.5c
stop 2.1c
Current 3.0c (stop to 2.4c). 

I thought I'd run with it because it looked ok. 

Only 1 of 2 stocks that I'm trading right now. Will try and post a chart soon.


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## tech/a (8 January 2014)

These explosive stocks if you can find them early enough
only last a few days before you tend to get aggressive reversals.
I remember a trade 6 or so years ago which I saw taking off at 
5.4c and I pyramided through to 10c and got off the lot at 10c
Most 1 day profit from One stock.
I think it eventually was taken over.


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## pavilion103 (25 July 2014)

Looking back at some of the speculative stocks that I purchased. 
One of them was LNG (not posted in this thread, I think it was before maybe). 
I purchased at 32c. 

Would have been a handy one to have held onto as part of the strategy outlined in this thread. 
$3.14 today. 

I think I sold it around 45c or something at the time. I can't remember exactly. 

We can never know which one will take off, but it supports the idea that, if in a portfolio of 10, one or two can make it big, with most stocks at breakeven, it can be a very passive way to make money.

When I get some more time, I'll probably take a look back into this again, without putting too much emphasis on it however.


----------

