Stock Trading Growing In Popularity: A Plan And Strategy

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Growing Popularity In Stock Market

Since the start of the COVID-19 crisis, there has been a large growth in the number of individuals taking up investing in stocks. I’m one of them, but I’ve also been considering it for years and have been watching for years. But the vast majority of individuals taking to stock investing have next to zero knowledge of the stock market, where to go to learn, what to trade, or even how to trade. They’re downloading the first free app they come across and are falling victim to “pump and dump” schemes.

For those not familiar with the term, “pump and dump” is basically when a trader tells their following to buy shares in a stock (“pump”). A stock which they already have thousands invested in. Once the vast majority of the followers blindly buy shares of the stock, which helps the price per share rise, they then sell all their shares off (“dump”). Leaving most of their followers, who didn’t know enough to sell as the dip was happening, with a net loss.

It’s great to see so much enthusiasm in income generation from from, including:

  • Network Marketing / Direct Sales
  • Various gigs/freelance work
  • Stock Trading

If nothing else, this year’s crisis taught the majority that we are not ok financially and helped many realize they can’t rely simply on one stream of income. So I think it’s great that interest people have in growing other streams of income and/or building an “emergency fund” is growing in popularity. But you should never jump in blindly. Always do your research and understand in anything you will have gains and losses. The goal is to have higher gains then your losses (gains – losses = profits).

There are many so-called pro traders that give out ridiculous advice, one was allegedly caught by a former student utilizing the “pump and dump” tactic. Personally, true or not, I don’t like the guy myself. I don’t know if it’s his “man bun”, his teaching style, or just his attitude, but there’s something I just don’t like about the guy.

My Advice

If you’re interested in investing in the stock market, there are a few things you need to know:

  • Never trade with emotion. If you let emotion control the trade, you will lose every time.
  • Use a trustworthy platform. I’ll name what I use below, but I highly recommend staying away from Robinhood.
  • You do NOT need thousands of dollars to start. Yes, the more you start with the quicker you’ll reach your goals. But even my mentor, who says you should really try to start with $10K (I didn’t), only says that to help you avoid emotion trading. Because despite the size of the account, you will still be starting off with small investments and small gains. So small losses don’t affect you emotionally the same way if you had less and lost a larger percentage of the smaller amount. I like my mentors teachings, but I have adapted them to my situation, and I’m doing ok.
  • Have a trading plan and strategy. Stick to it. Even after a loss. You will not win 100% of your trades.
  • ALWAYS start by practicing with “paper trading” BEFORE you invest real money. Practice using the strategy you’re learning and your trade plan. Trade as if it were your real money. This helps you get familiar with the market and build your confidence.
  • It’s a smart idea to put 20-30% of all profits aside for taxes.

Find a mentor you like, that is honest. I learn from Markus Heitkoetter of Rockwell Trading. Markus makes things very simple to understand and teaches a super simple strategy he calls the “Power X Strategy” (book is currently free). I highly recommend following him on social media, creating an account on his website, and downloading the Rockwell Trading app. You will learn a lot. And his strategy is very flexible. Like I said, I’ve adjusted it to fit my situation. Nowhere near an amount $10K and I’ve already started trading. After learning the strategy, and adjusting it to my situation, via paper trading.

If you’re new to stock investing, especially if you don’t have upwards of $25K to start, please do NOT even consider the idea of day trading. I only recommend swing trading and long-term investing.

  • Day trading: buy and sell the same stock in the same trading day
  • Swing trading: buy a stock and hold it at least a few days (Power X Strategy is 5-20 days)
  • Long-term investing: Holding a position (stock) for months or years. I recommend stocks or ETF’s that pay dividends for long-term investing.

Using the “Power X Strategy” I kind of take Markus’s teachings backwards. He teaches to learn regular stocks and options first, before moving into higher volatile areas. Well, I’m trying to short-term (swing) as well as long-term investing. So considering more shares equals more profits, I started attacking penny stocks (stocks that sell at $5 or less per share). It took quite a bit of paper trading and research before my gains to losses ratio was at an acceptable percentage. But now I feel confident in the strategy and have begun trading.

For stocks on the exchanges, I use Webull. For stocks on the OTC (over-the-counter) markets, I use Thinkorswim by TD Ameritrade. And for my long-term investments, I use Cash App. By doing so, my portfolios are kept completely separate and easier to keep track of. I do not recommend Robinhood considering all the platform issues and lack of data. I’m considering helping people learn the “Power X Strategy” the way I use it by following and/or joining me in my trades. The idea of it would be that you look at why I’m buying what I’m buying when and why I’m selling it when I sell it. But if you want to trade along side my trades, I ask that you download Webull using my link and during account creation input my referral code you will see on the sign up page when you click my link. Likewise, if you don’t have Cash App and use my referral code/link, you will receive $5. Code: GVFSMMP

If you’re investing is fully or partially with the idea of creating an “emergency fund” or “retirement fund”, or you don’t have a bank account at all, the bank I use is amazing. You can turn on savings features that rounds up the change on all your purchases and puts it into your savings account. And upon receiving your first qualifying deposit ($200 or more), you could receive a bonus $50! This bank has become my primary account for trading purposes. I absolutely love the bank, and have had zero issues. To go over the terms and create an account with this amazing bank, click here

Please stop falling prey to “pump and dump” schemes. Stop listening to socalled gurus. Do you research and practice. Trading stocks isn’t as complicated as most make it sound, but is a risk. The sooner you have a trade plan and strategy, and you stick to it, the sooner you will reach your goals. Just remember, this isn’t a sprint, it’s a marathon. You will not gain millions over night, but you can snowball your account overtime. The longer you trade, you’ll be able to tweak your strategy to raise your chances of higher gains.

My Plan/Strategy

And again, you do not need a $10K+ account to start investing; IF you are able to keep your emotion out of trading and you practice first. I started with just $100. How does a measly $100 do anything? Because I’m not expecting riches overnight, and if I lose this week’s trade there’s always next week. The way I do it is this:

  • $100 on a stock $5 or less per share, getting as many shares in the stock as possible. After the stock was narrowed down and ultimately chosen through using the Power X Strategy.
  • Set price alerts at key points, both above and below my buy-in price. Utilize “stop losses”
  • Try not to watch my position day in and day out. I know I’m going to be in this position for anywhere from 5-20 days.
  • When the strategy determines it’s time to sell, I sell. The original $100 plus half the profits go into the next trade, and the other half of the profits goes into my account. About 20% is then moved out of my primary account to a secondary account for taxes.
  • Repeat with a new $100 trade every week. Which adds to the amount of open trades I have, and adds to the “snowball” effect. Ultimately you will eventually have trades opening and closing everyday far above $100 per trade and growing profits per trade. 
  • I try to minimize losing trades to only 2-5% loss, so I can maximize my profits on winning trades. (profits=gains-losses) Since I set 50% gains plus original trade amount aside for the next trade, and 20% aside for taxes, that only leaves me 30% of gains per trade to cover any losses.
  • I have set goals for gains. On most trades, I will trade a 1:2 or 1:3 ratio. On trades I’m pretty confident about, I may push that a little higher. Then once my mark is hit, I exit. I do this because:
    • If it goes up still after I exit, who cares? I’ve already made my profits I aimed for, so I’m not really missing out. 
    • If the stock then starts to go down, well I’ve already exited the trade with my profits. So a downward spiral won’t affect me, other than I may decide to buy the dip and profit on another rise.
  • When you exit the trade, put the original $100 plus 50% profits toward a new trade. Once you are opening/closing trades everyday, it would be the same principle just with increasing value. Original trade plus 50% into a new trade; of the remaining 50% profit split your spending money from that being set aside for taxes. 
  • For long-term investments, I look for stocks in quality companies and ETF’s that pay dividends. These stocks and ETF’s are put into my portfolios in Cash App and Ally Invest.

A profit ratio of 1:2 basically means that for every dollar you invest, you want to earn two dollars. Therefore 1:3 would be for every one dollar you want three dollars, and so on. Getting started, I would recommend a 1:2 ratio. Anything higher, you may end up losing money until you learn more about the market and get some experience. 

This is how I run each of my portfolios. I start small and gradually work my way up. It’s simple, it’s easy, and actually quite fun. I also utilize a separate bank account from my spending account to fund my investment accounts and hold money I set aside for taxes, this helps me keep things organized.

Thinkorswim has a downloadable desktop version, a cloud based web app, and a mobile app for iOS and Android. I do all my trading on my mobile, I don’t use a computer/laptop. Between the platform apps, and a few additional tools (also apps), which include Atom and Teletrader, I haven’t come across the need for a computer/laptop yet for my trading. So swing trading, profitable at that, most certainly can be started on an extremely small account and strictly from your cell phone. Don’t let the gurus convince you otherwise. 

The regular TD Ameritrade app is great too. But thinkorswim is a bit more robust and more what I’m used to using. Whichever platform by TD you create your account on, it will be usable on both the Ameritrade and thinkorswim platforms and apps with the same login. So you can download both apps and see which one you’re more comfortable with. 

In Conclusion…

Doing this, with the correct strategy (you may decide to use a strategy other than Power X; I like Power X because it’s simple and works for me), you can grow a small account into a rather large account pretty quickly. But you need to understand you will have losses. Don’t give up. Set aside money each week and trade a stock every week (after you’ve practiced first). You will eventually get to the point where you are opening and closing a trade every trading day with much more than $100 per trade. Once you master the strategy you choose to use, you should be able to still have profit even if you lose on 50% of your trades.

Have confidence in yourself, your plan, and your chosen strategy. And most of all, have fun. Trading should be fun, not stressful. If you’re stressed out when trading, you’re emotions will take over the trade and you will lose money. To get started learning and trading quickly and affordably:

  • You could start with the trade plan I use for myself outlined above,
  • Get your FREE copy of the “PowerX Strategy” book
  • Download Webull (and get your free stocks) and get a Thinkorswim account, build a portfolio on each. And utilize the Webull paper trading feature for practice,
    • I also recently downloaded SoFi to test it out and maybe get another portfolio going. Use my link by clicking SoFi to download and setup your account and you could win up to $1,000 in free stock while the promo lasts. It seems to have a lot of educational info for beginners.
  • Download and create an account on the Rockwell Trading app to learn the stock market in simple terms.
  • For those with high risk tolerance, I adapted the PowerX Strategy to penny stocks (stocks $5 or less per share). It is doable but these stocks are extremely volatile and you absolutely cannot trade on emotion or greed. Paper trading for practice is highly recommended if you decide to penny stock trade. If you’d like to trade alongside me, and join a private group of other swing traders of all experience levels, click here. Benefits of joining the group/newsletter:
    • See what is on my watchlist(s) and why
    • Trade my trades with me and learn why I’m buying/selling when I do
    • Shorten you’re learning curve 
    • Access to the private Facebook, MeWe, and Discord communities.
    • And more (listed on the newsletter page)

Complete Learning

Follow my stock market tweets on my Rideshare Red Twitter account at @TheRideshareRed. Utilize the learning center on thinkorswim and paper trading on thinkorswim or Webull. Public content on Facebook, will be posted to the new Facebook page. We also now have a Discord Server with both private and public channels, and a Telegram channel for those who don’t use Facebook or MeWe. 

Load up on Rockwell Trading:

 

 

Disclaimer: I’m not an advisor or fiduciary. I’m just your average swing trader offering up a bit of advice from my experiences. This post is for educational and informational purposes only. Always go to a fiduciary or other advisor for financial advice. Investing of any kind does have a risk of loss potential. Before investing, do your own research, practice, and evaluate your risk level and type of investing you can handle and afford.

Note: I am not employed by Rockwell Trading. My advertisement of the book and app is sincere appreciation of the simplicity of the teachings offered and how it helped my understanding of the stock market. The banks promotional $75 is only as long as they run the promotion. I don’t have dates in this post because they keep extending it. Click my link above to view current terms.


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