By Jason Bond, entrepreneur and small cap stock expert at JasonBondPicks.com
There’s no easy path to becoming a successful entrepreneur. In fact, even the most accomplished business owner would admit to making hundreds of mistakes. Although no two entrepreneurial journeys are the same, one thing is true about most startups in their infancy: they don’t have a robust cash flow.
For entrepreneurs looking to balance family and work life, this can be a major red flag. Where does money come from when you’re in the commitment or validation phase of scaling your company? And how do you put food on the table when there is an extra mouth to feed? That’s where supplemental income comes in – and swing trading is a great way to get your piece of the pie.
At its core, swing trading is a short-term strategy used to buy and sell stocks that are trending upward or downward in the near future. Sometimes overlooked by large hedge funds and investment firms, small-cap stocks can yield big results for the little guys – especially those with business acumen.
With the right coach, and a bit of practice, any strategy-minded professional can develop a significant amount of supplemental income leveraging my tried and true strategies. For startup leaders struggling to make payments on a mortgage, car loan or even the heating bill, that cash is invaluable. Here’s how to get started:
Begin with $0 as a student.
Learning to trade doesn’t cost a dime, but it does take time and dedication. Beginners should practice inside a virtual margin account using a service similar to Think or Swim’s paperMoney, a trading platform which allows users access to “play money” up to $100,000.
To avoid draining your entire account, my advice for beginners is to put no more than ⅕ of the portfolio into any swing trade at one time (which equates to five trades at $20,000 each). Keep a close eye on your trades over the next week, and as soon as you see 5-20% profit, cash in.
During the practice period, you will learn a lot about the ebb and flow of the market, without risking any real money. The insights gleaned through this type of training will leave you feeling confident and ready to proceed with real money trading.
Start sniping small caps with $2,000.
When you only have a couple thousand dollars, you don’t have the luxury of spreading your money between picks. The sniper’s main goal is to capitalize on stocks with explosive return, and to cut losses with extreme discipline. Simply put, snipers know what they are looking for in a trade. If what they see matches up with what they expected, they make money. If it doesn’t, they risk losing it all.
The best snipers always make successful traders because they have intense discipline, and they know how to grow money quickly. They can apply the strategy needed to grow $2,000 into $100,000, and use it to turn $100,000 into $1,000,000. Proceed with caution though, snipers need only make one small misstep to wipe out an entire account.
Call yourself a trader when your portfolio reaches $10,000.
The key to survival in the stock market? Staying in the game. The best way to stay in the game? Avoid losing it all. With $10,000, a swing trader can start to diversify. That means spreading out funds across picks to hedge your risk – protecting against small losses along the way. The sniper does not have this luxury.
If you spread $10K across 5 different stocks ($2,000 in each investment) and count on a win rate of about 75 percent, your portfolio will start to build quite quickly. With that kind of money, entrepreneurs can keep their head above water when a startup seems like it might be sinking.
Above all, a successful trader never forgets to pay him or herself. Knowing when to take profits is key when you’re looking at small caps as a source of secondary income. Before you enter a stock, decide when you’re going to get out. You’re never going to catch the top consistently but you can capture consistent 5-20 percent returns. Keep the same strategy and you’ll be surprised how quickly profits add up.
Jason Bond is an American stock trader, entrepreneur and small cap expert. Bond teaches small cap swing trading at JasonBondPicks.com. He is best known for beating the S&P 500 in the portfolio he manages the last 3 years in a row. In 2016 alone his portfolio has gained a staggering 340% so far. Bond’s small cap swing trading ideas are widely published on numerous financial sites and blogs.