Scott, my feeling is that DD on penny stocks is overrated. There just isn't enough reliable information available on these kinds of companies to make a really informed choice. Most of what is used for DD is actually just company propaganda, promotional literature and unfounded rumours. Also, I think DD encourages falling in love with a company, which is suicidal.
As far as holding on during a slump, we're not talking about blue chips here. If IBM tanks, there's a good chance that if you wait long enough, you'll recover your loss. With penny stocks, this is a dicey proposition. Many of these things never come back to previous highs.
Then there's the issue of the time value of your money. If you're down 80% in Northern Scam Mining, and by some stroke of luck you get your money back a year later, you're still down because your money has done nothing for you during that time.
So, for me, the only way to play these things is to set your loss limits before you buy and stick to them. I try to take small losses when required and not dwell on them. Just move on to another play. Staying away from stocks under $3 and popular plays really helps because the volatility is not as great.
Of course, all of this is easier said than done and I have to continually remind myself to be a good boy :-).
Cheers,
Robert |
