It seems like everyone wants zero risk plays with crazy potential.
Let’s put that to rest right now: It does not exist.
Now, risk and reward are bound together, okay? They move together. So what that means is, high risk, high reward.
That’s what I learned from my mentor and it’s what I teach, too. Does that mean you have to take unnecessary risks? Absolutely not, as long as you have the right education…
The Big Picture
So, what kind of stock meets the criteria of high risk, high reward?
I’ve written about low float stocks many times before. In a nutshell, the float is the number of publicly traded shares. Low float is typically less than 10 million shares, but there’s a little give or take.
In this day of multi-billion float mega-cap companies, some stocks with a 20-30 million share float trade like low floaters.
Now, why do I like low float stocks?
Because they’re the ones that give you ridiculous moves and multiple opportunities. And recently we’re seeing a resurgence of…
Low Float Mania
Ever since the PDT rule went away, we’re seeing low float stocks pop up every day.
Now, when you trade the low floats, you’re going to get stopped out a lot. But the potential makes it worth it to trade.
It’s completely different with the higher float stocks. They are lower risk, and your odds of getting stopped out come down. But so does the potential reward.
So, you see people who are constantly frustrated. They trade these wild stocks and then they complain that they got stopped out. Or they’re scared to trade because they might get stopped out.
There’s no free lunch. If you’re going to trade volatile stocks, you’re going to get stopped out a lot. That’s just the reality. But when you catch one, it can make up for a bunch of small losses on one go. That’s why we like the Rule of 5 thought experiment.
My Take
If you really want to move the needle on your trading account, you’re gonna have to embrace higher risk for the highest rewards. The key is to always trade with a plan and stick with it. Never get into a trade without knowing your risk level. Know your targets. Then, you either get stopped out or you hit your target. Keep it simple.
Watchlist
Since the stock market is closed, it’s two for one day…
The first is a low float gapper so you get an idea what I mean by high risk, high reward.
Linkers Industries Limited (NASDAQ: LNKS) entered a definitive agreement to increase its ownership stake in LPW Electronics on June 17.
LNKS gapped up overnight and ran 100%+ in 20 minutes.
LNKS, 6/17-18/26, low float gapper
In the end, LNKS was a no-trade for me. But that doesn’t mean I won’t watch it. See the rolling watchlist methodology here.
The second stock is a higher float swing trade idea.
QuantumScape Corporation (NASDAQ: QS) announced a joint venture with Honda R&D Co., a subsidiary of Honda Motor Co., Ltd., to develop solid-state batteries.
The stock popped and dropped in premarket but then came back in regular hours.
QS 6/17-18/26, more of a swing trade idea
Now, the market is closed today and I don’t have a crystal ball, so this idea might be dead on Monday. But you can still put it on your watchlist.
On My Radar
- The stock market is closed today. So, enjoy time with friends and family
- President Trump signed the deal to end the war and the markets love it. Get ready my friend, this market is set to fly.
- The AI top dogs met with G7 leaders earlier this week. Let’s hope they don’t try to regulate the U.S. into second place.