THE BLOG

7 Lessons Penny Stock Trading Has Taught Me About Life

06/01/2015 05:59 pm ET | Updated Jun 01, 2016

I started trading penny stocks as a high school student, and since I recently turned 34, that means I've been an active trader for more than 15 years. And while nobody likes to admit to getting older, my recent birthday has left me reflecting on what I've accomplished and where I want to go from here.

What it all comes down to for me is that I'm grateful to my chosen career for letting me live the kind of lifestyle other people only dream of. But it isn't just about the money. I'm humbled to have learned the following seven life lessons through my work as a trader.

Lesson #1 - Think for yourself

A lot of people hear that I trade penny stocks and they immediately get dismissive. "Tim - those are too risky," they say. And you know what? If I hadn't had the chance to look deep inside the penny stock marketplace and learn what I know now, I might actually agree with them.

But after 15 years of trading and more than $4.2 million in trading profits, I can confidently say that there's tremendous opportunity there - if, and only if, you're willing to actually learn the system.

As a trader, I look for repeating patterns of stock movement that I know how to trade. It doesn't matter if the stock's going to be the next Microsoft or the next bankruptcy - I'm going to profit either way. All I care about is the stock's price movement.

When you take the emotions out of it and learn to recognize how stocks behave, you can make money whether the stock goes up or down. But you'll never learn how to do that if you let all the penny stock haters out there get into your head. Think for yourself and learn to recognize opportunity when it comes knocking.

Lesson #2 - Don't be afraid to fail

I wish I could say that it's been a smooth ride getting to that $4.2 million. It hasn't. As a trader, my win ratio is only about 75% - and some of those 25% losses have been pretty brutal.

When the hedge fund I was running lost 35% in a year, I could have gotten depressed enough to take myself out of the game. But as painful as it was, I learned to look at the loss as a learning opportunity.

Now that I'm older and wiser, I'm almost grateful for my losses, because they show me how I can be better in the future. Adopt the same mindset yourself and you'll benefit, whether you apply it to your trades or your life in general.

Lesson #3 - Focus on staying in the game

I hinted at this above, but I think that one of the best things you can do for yourself - no matter what career you're in - is to focus on staying in the game.

In the world of penny stock trading, that means not risking your portfolio by taking such a big position that a loss would bankrupt you. No matter how hot that tip you received may seem, you can't risk your ability to trade the next day to chase even the biggest of wins.

If you ask me, that's a pretty cool mindset to adopt overall. If you slave away at the office 80 hours a week, you're compromising your health - something you really need to continue advancing your career. Or say you get super into a physical hobby like Crossfit. Jumping in too quickly and going too hard at the start risks injury, and if you're injured, you can't show up the next day.

I guess it all comes down to balance. Life isn't a sprint - it's a marathon. Are you living in a way that's sustainable for the long-run?

Lesson #4 - Find balance in your life

Now, I'm not going to lie - the life of a penny stock trader isn't always the healthiest. Days spent active trading and nights spent researching can take a toll, and I'm not embarrassed to tell you that I'm staring down 34 with a few extra pounds around my waist.

I haven't always been the best at balancing work and life. I'm so driven that, sometimes, all I can think about is how my students are doing and what else I can teach them to help them be successful. That kind of all-consuming focus takes its toll, and the result for me has been poorer health.

Don't learn from my example here. Remember what I said in my last lesson about staying in the game? It doesn't just apply to your portfolio - it's crucial for your health and well-being as well. Focus on staying healthy, and your trading profits will benefit as a result.

Lesson #5 - Always have a plan

Day traders sometimes get a bad reputation for jumping in and out of stocks without much foresight or planning. I don't work that way. Over time, I've learned how important it is to me to always have a plan for my trades.

I know what price I want to get into a stock at, and I know when I want to get out. I know how much risk I'm willing to take on for how much reward, and I'm crazy disciplined about not exceeding these limits - even if it means missing out on potential profits.

I think you almost have to live life in the same way. If you don't have a plan, how can you be sure you're doing the things you want to do during your time here? Say you want to be a millionaire and retire at age 45. Or say you want to fly a private jet on a luxury vacation. You can't do those things if you don't plan ahead.

Lesson #6 - Control your risk

I mentioned risk above, and that's a lesson I want to touch on more here. All stock trading is risky - penny stock trading included - but the thing is, it's not as risky as most people believe.

What's risky is not educating yourself and letting yourself get swept up by predatory teachers and stock promoters with their "hot stock tips." If you actually take the time to educate yourself, you'll learn a lot of different risk mitigation strategies like monitoring liquidity, controlling your position size and setting mental stops based on price action.

It's not that risk is a bad thing, but if you can control dangerous risk, why wouldn't you? Apply this lesson to your stock trading and to the rest of your life.

Lesson #7 - Aim for the stars

Finally, nothing bums me out more than hearing from people who feel like their dreams have been crushed by the lives they're currently living. And I get it - long hours and low pay will take the spark out of anybody.

Don't fall into that trap. Opportunity is out there - waiting to give you the life you've always wanted. I'm living proof that it's possible to make your dreams come true (and if you doubt me, know that all my trades are public and audited by professional firms). Stock trading has made me rich enough to do things like travel to more than 100 countries and buy my dream car, and it can do the same for you.

No matter what your dream is, don't give up. Your time here is too precious to waste being ground down under somebody else's shoes. Aim for the stars, and you'll find that there's nowhere to go but up.