Episode 34: Stephen Trades some Big Boy Stocks
The Steady Trade Podcast isn’t necessarily about shock value. Rather, we want to help traders build a strong foundation so that they can enjoy a long and profitable career. However, in this episode, Stephen Johnson does indeed shock co-host Tim Bohen with a revelation: he’s trading big boy stocks now.
That’s right: Stephen has tested the waters of trading higher-priced stocks, and the results have been encouraging. In the episode, Tim and Stephen explore the world of higher-priced stocks and how penny stock traders can stand to benefit from trading them.
Why trade higher-priced stocks?
It’s a common misconception that if you have a small or medium-sized account, that you can only trade low priced stocks. Many new traders think that they can really only trade stocks that cost between pennies and a few dollars. But as Tim points out, as amazing as low priced stocks are, they do tend to have a feast or famine cycle: they can go from busy to quiet on a dime.
Many traders don’t even realize that they can trade higher priced momentum stocks. Yes, you have to be selective and pick the right ones, but if you catch the right idea at the right time, you can make more money per trade.
Higher priced stocks can also be easier to chart because as Tim says, the moves aren’t as “wonky”. You don’t have bizarre 300 percent moves like you’ll see in the world of penny stocks, so they’re easier to track. It is also far easier to find shares to short!
Stephen trading big boy stocks
Stephen used to be underwhelmed by higher-priced stocks. He thought there wasn’t much volatility in higher priced stocks, there was no edge, and they were mainly for people with bigger accounts. But then, he evolved.
In the episode, you’ll learn how in charting social media stocks, he was able to identify catalysts that made him realize he was well positioned to profit.
Tim is amazed by Stephen’s prowess: he took into consideration technicals, fundamentals, the news, the hot trend, and he built his case before trading. No, this doesn’t mean that one will profit all the time, but it heightens the potential for success quite dramatically.
Curious about trading higher priced stocks?
In the episode, Tim and Stephen discuss ways for penny stock traders to start looking at higher priced stocks. To start, they discuss important differences between approaching a penny stock trade versus trading a higher priced stock.
Looking at daily ranges and scaling expectations is key. For instance, looking for stocks that are making big moves relative to the price for share is vital. The same type of movement that might be significant on a penny stock is going to have to be scaled up dramatically for a $10 or $20 per share stock.
The rule of tens
In the episode, Tim dishes on an invaluable trick for every trader who wants to delve into higher-priced stocks. The so-called “rule of tens” is something he applies to stocks over $10 or so. It’s a ratio in which he divides the position size by ten and offers an easy trick for traders to determine a comfortable rate of trading on these higher priced stocks.
Cautions and considerations
Safety first, for you and your account! Tim and Stephen also talk about some important cautions for buying larger stocks. Traders should never underestimate the other side of the trade and must avoid becoming over exuberant. Of course, then again, this is part of the beauty of trading: if everyone were rational, traders would never get these opportunities. But you don’t want to be the cautionary tale!
In finding success trading higher priced stocks, Stephen feels reborn. “Tim Bohen, you are right about high priced stocks” is his battle cry, and he now sees brand new opportunities as a trader. Moreover, higher priced stocks can offer a great way for penny stock traders to diversify!
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