A lot of people, especially beginners, try to hit grand slams in the stock market. It’s like having a brand new baseball player try to hit a home run against a professional pitcher – it just doesn’t work that way.
You’ll often see beginning traders put their bag of cash into a discount broker in hopes of getting a huge return from purchasing one or two stocks. If you take your $10,000 and put it in one or two stocks, you’re not going to get back $30,000 (unless you’re very lucky!).
Unfortunately, the stock market just doesn’t work that way. If you do happen to hit a home run (or a big return), it is unlikely to happen again the next time…
Beginning traders will also try to hit grand slams by trading penny stocks – the stocks that are cheap for a reason. They are horrible companies!
People think they can buy 500,000 shares and make a fortune even if the stock only goes up 50 cents. Chances are, however, the stock price will go up automatically as you buy the stocks.
The problem is: you have 500,000 shares and need to get out of the position. When you start selling your shares, the stock begins to go down.
How are you going to get people to buy your shares? You might have to lower the price to get out…
It becomes very difficult; especially if you don’t have the liquidity. Not to mention the fact that these companies are easily manipulated!
Be careful when trading this way. Understand it is a lot tougher to create these ‘homeruns’ and big returns. I recommend staying away from these concepts altogether!
Instead, focus on consistency. If you’re just hitting singles, doubles, etc. – this can add quite a few changes to your life! As your experience and knowledge grow, you’ll be able to make even greater trades and still find the consistency that leads to stability.