The Investment vs. the Trade

The typical penny stock investor (PSI) brings with him a general understanding of how the upper exchanges work, an impatient ambition for quick gains, and the misconstrued conception that he knows how to "go long". The PSI tells himself that he's here to invest, when in all honesty he's here for a trade. Allow me to fully differentiate these two concepts.

the Trade:

The trade is the impatient man's tool of buying low and selling high within a short period of time. The trade's time period could last from intraday to a few weeks, just enough time for a press release, or a few PR's, to come out and embellish the company's "amazing" progress. In actuality, so little time has gone by that the company probably hasn't made many strides at all. Therefore, the Trade's success isn't as much reliant upon the company as much as it is the investor's own luck to call the bottom, or by his ability to read charts well enough to use his "skill" in predicting the bottom based on company performance. While this method can often have its success, like gambling, the house will tend to come out ahead due to the prolific gravity existent on the lower exchanges. The outcome being... two plays down, one play up (but due to the impatience of the PSI, that up-play is typically pulled too early). Some people can stay afloat in this. Typically, the Trade is done on any stock because true investments don't come around that often....


the Investment:

The Investment is the extremely patient, well-researched, well-thought out trading plan of a hardened investor. Only those who could get kicked in the nuts and not grimace, dare choose this strategic financial path. Warren Buffet was one of those men. The Investment's duration could last anywhere from a couple of months to a couple of years. There is a reason why people don't choose the path of the Investment down here on the lower exchanges. Aside from their own impatience, the path is also scary... very scary. The investor's tool throughout this path of the Investment lies entirely on his "skill" of seeing how present research validates a significant and foreseeable future. Much of the time will be spent in the red due to the existent gravity. But unlike the Trade, the Investment is more selective on which horse to bet on. More importantly, the Investment is entirely reliant upon the company's own progress rather than the perception of people.




Observation:

The PSI is a funny being, however. He likes to trick himself. He's such a funny guy, you see.


Often, the PSI enters into a stock thinking he's investing but internally sets his clock on trade mode. He wasn't entirely looking into the company he was investing in order to answer all the tough questions about the company's future (or noticing if it was even able to be discerned)... he was more intrigued by a single piece of news or an attractive event. Even more so, he likes to pay attention to the stock price (more or less a measure people's opinion of the stock) rather than the effect of the current news on the outlook of his company's future. But here's where he gets funny, you see..... Get this. Midway through his trade operation, he'll often switch from the path of the Trade to the path of the Investment!! He'll rationalize the news... that is, now that he's a strong man *grr* a "dedicated long."

"Sorry! No can do, Sucka!!"

Only the "elect" stocks can be reserved under the path of the Investment. The rest eventually go down to Penny Hell, just as they're inevitably meant to do. In the end, maybe he got lucky & chose one of the "elect"... but the odds are highly against him given the feces level that tends to muck much of the Pink Sheets.





Allow me to end this post with clear intentions & a few notes:

1) Here with Investing Pennies, it is my intention to show you how to invest, not trade.

2) Down here on the Penny Exchanges (aka lower exchanges), it is absolutely IMPOSSIBLE to invest in just ANY company. The company must have the ability to endure Penny market conditions, and more importantly be able to offer distinct comparative advantages that allow it to be a significant competitor in its respective industry.

3) I want to be explicitly clear that it is OK to choose either path (whether of the Trade or of the Investment), but is it NEVER okay to believe that you can freely change from the Trade into the Investment. Whatever floats your boat. For me, success doesn't come via the path of the Trade.

4) It is also OK (& smart) to flip some shares if you're in the middle of an obvious spike when you're going down the path of the Investment. The main idea to keep in mind is that you understand the situation that's going on around you and that the future is relatively clear, even when it means knowing when something is overvalued at the present time.

5) Last of all, I want to direct your attention to one of my favorite penny stock INVESTMENTs that I just wrote a complete overview about at my Recommended Investments page. Here's the direct link to the article: "I'm a link. Click me, baby!"