Acceptance that the value of preserving your account size is far greater than the slim chance of seeing
    it double or triple in a day will be required before investing in Penny Stocks.  Practicing a diversified
    technique will mean that when a stock you own doubles or triples, your overall portfolio may only
    experience a 10-20% gain.  This certainly takes some of the fun out of huge percentage winners, but if you
    have ever lost all of your hard earned cash on one trade, you know just much fun proper allocation can be.  
    By taking no more than a 5-20% chunk of your portfolio for one stock, and breaking that down into two or
    three separate buying opportunities, we can set either real or virtual stop losses at around 50%, leaving no
    more than 2-10% of the portfolio at risk with one bad trade in a worst case scenario.  This also allows more
    positions the opening to run, and the upside potential remains boundless.

We habitually begin to think about taking profits when a stock has gone up by 50%, even less in certain
circumstances.  We take only half or less of the position off the table giving the remainder an opportunity to
go higher still.  This also lowers the position size, giving us the chance to add more shares at either a
lower price, or occasionally, even a higher price if the situation warrants.  This partially conservative
approach in a fanatical marketplace gives us an edge over a vast majority of retail penny players.  
Hopefully, your first blast of realism came or will come from the knowledge that you are an individual
investor, and do not fit into the standard cookie cutter scale with a simple age and income plugged into an
even less complex formula.  Bottom line; having realistic goals when it comes to time frames, profit targets
and personal risk tolerance will afford you as much enjoyment and reward as you can seize in the realm of
Micro Cap Stocks.

           We use fundamentals as the basis for technical analysis that allows us to get cheap prices, however
    the moment fundamentals change for the worse, and upward momentum levels off, we are out of the
    position within the blink of an eye. We do not arbitrarily buy and take profits at preset levels, instead we
    constantly adjust our parameters, exactly like a market maker would do. Simply putting a quarter of your
    money into a stock and adding a quarter every time it falls by 50% is a sure road to disaster. Instead we
    must remain alert and only average down when conditions dictate and our issues remain strong and
    cheap. Monitoring news with these stocks is particularly important, but not when setting up a buy. We
    monitor news for intra day sells only, and we will sell a position if and when absolutely horrible news
    comes out. Fortunately, the slow trading nature of these stocks will often allow you plenty of time to get out,
    typically within 30 minutes to a few days. Our buying typically occurs when there has been no news for a
    while and price has fallen from recent highs by a considerable amount.

           Several centuries of investing in stock markets has taught us one thing, diversification is the key to
    success.  Let's start with famous investor Benjamin Graham's epic diversification advice. He recommends
    splitting your retirement portfolio between stocks and bonds, starting with a 50/50 mix, and extending it to a
    25/75 mix either way at the most. This shift of cash should only take place naturally, as stocks become
    cheap or over priced when comparing valuations to the oldest and most accurate historical analysis. We
    feel that diversification should be implemented across all aspects of our portfolio. In other words your
    bonds should be diversified between low and high risk vehicles and the same can be said about your
    stocks. We recommend using a small portion of your overall retirement fund for penny stocks. This
    percentage can be adjusted with age, but only among the stock portion of your overall portfolio. We
    recommend no more than twenty percent of your entire portfolio invested in penny stocks at any given time.
    To further enhance the safety and possibility's of this portfolio segment, we diversify among several penny
    stocks of different market sectors and risk levels. Please do not put all of your money into one of our stock
    picks, although we are very optimistic about our picks, we cannot guarantee success. Start slowly, using
    between five and ten percent of your penny stock money at a time. This slow building of a solid penny stock
    portfolio will allow you to learn how to harness the profound power of this market segment before you have
    the chance to lose your money and be frustrated by penny stocks for the rest of your life. Our goal is to
    promote rational behavior in this irrational market.
    Realistic Goals for Small & Micro Caps
    PSW Staff
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