Just as expected with penny-stock trading, every trade produced a drastic
change in financial status and caused extreme highs and extreme lows in profits.
I felt the volatility and unpredictability throughout my simulation with penny
stocks. Each opportunity held heavy consequences and decisions were met with
my equally heavy consideration. A jump of a few cents created a huge
investment fluctuation and, in one case especially, a one cent drop yielded a loss
upwards of $12,000.
Many of my decisions called for such careful, measured action that taking
the time to consider all variables proved somewhat disadvantageous. Analyzing
price charts and technical analysis takes time and then the time to react to
foreseen trends takes even longer. Penny-stocks, with their extremely volatile
nature, called for constant watch of the market and the status of my investments.
Though I missed a few opportunities, my near continuous watch of the market
allowed for good selling chances and capitalization on most of my chances.
With my penny-stock simulation, for each successive trade, I invested all
the cash from the previous trade. In other words, since I allotted $50,000 to each
half of my penny-stock simulation, I invested everything that I could for each
investment and I didn't hold any cash back. I varied my strategy slightly for my
swing trading simulation but I, inevitably, determined that by investing as much
as possible (and also taking the most risks), my rewards were greater and my
goals came closer into reach.
My penny-stock simulation met the goals that I had set out with from the
beginning. My final asset total came to an impressive $110,523.57 and yielded a 42
10.5% return on my initial $100,000 investment. My goal for a 10% gain using an
established investment strategy was thus achieved. I feel, though, that even with
such remarkable results, the penny-stock trading strategy’s risks outweigh its
rewards. With careful observation and research, it is only possible to outsmart
the market and come away with a profit. One false move and, as stated before,
a price drop of one cent can leave an investor in utter ruin. The penny-stock’s
inherent instability alone should dissuade investors from pursuing such a
dangerous course to profit, but there are very few things in the world as powerful
as the promise of a fortune. The human drive to amass such a fortune is the
fuel that keeps the stock market burning.
My only criticisms of a penny-stock simulation are that the hours spent
watching the market for perceivable signs and indicators are long and intensive
but, as such, a penny-stock simulation proves to be a worthwhile exercise and an
extremely valuable learning experience. The simulation replicates exactly the
time, effort and patience required to be successful in a real-life scenario. The
simulation also helps to appreciate the seriousness of investment situations.
With my swing trading simulation, my financial success was not as
outstanding but the simulation played itself out rather well. I first invested in a
company (Johnson & Johnson) that turned out to be less than desirable in a
swing trading simulation. After a few weeks of torment waiting for the stock to
perform to my expectations, I invested into a different company (Kraft Foods Inc.)
and was met with more promising results. The table on the following page
summarizes each trade made during my swing trading simulation: