Mining Share Market Tips Made For Managing Migraines

If you are new to the world of speculating in resource stocks, especially junior mining companies, there are some pivotal pieces of advice that can make or break you. Unless you have nerves of steel and an iron stomach, I suspect you’ll benefit from these mining share market tips. Some of these could literally keep you from unnecessarily wanting to throw yourself under a bus.

First, let’s clear the air and confess that we are talking about speculation. Yet, let’s also be fair and acknowledge that there is a world of difference between educated speculation and rank gambling that approximates throwing darts. When I’ve been reckless with my investment dollars, I’ve tossed money to the toilet like I was taking out the garbage. Been there, done that. But, with well-researched, prudently-placed bets, I’ve also watched my portfolio rack up 20 or so triple digit winners, and I’ve even seen a four-digit return! This isn’t so much one of my mining share market tips, but it’s healthy to put things in their proper perspective from the outset.

With that out of the way, let’s look at the second point I want to make. You are investing in perhaps the most violently volatile sector in all of the investing world. If you can’t handle, wild, unjustifiable swings, stay away. And I’m not talking about 5 or 10% moves. I’m not even talking about 15 or 20% moves. I’m talking about stocks that can move 30, 40, or 50% over time. If there is just one of my mining share market tips you need to understand, it is this one. You will drive yourself nuts if you expect these companies to trade like your average NASDAQ or DOW stock.

More really needs to be said about this most important of the mining share market tips, so here’s a poignant example. Heck, in the meltdown in the fall of 2008, I watched some of my positions give up 90% or better! Some of you would be mortified as the red glow of all those 90%+ losses lit up the room. I backed up the truck and bought like a madman. Today, I’m blessed for having done so. Just understand that these aren’t just small cap companies we’re talking about. Some of these are more like sub-micro caps! They are thinly traded and it doesn’t take much action to see big price swings in either direction. But, let’s face the facts. A 40 cent company can endure a 10,000% return and still trade for just $40. By contrast, a $40 stock would be at $4,000 a share if it increased 10,000%. I really don’t see that happening.

Third, and building upon the prior mining share market tips, understand how this volatility might affect your trading strategies. I thought I had discovered the Fountain of Youth the day I discovered trailing stops. But trailing stops in this market sector will get you in big, big trouble. I repeat the fact that these stocks can swing big, even to the downside, and essentially nothing has happened fundamentally with the company. I’ve even seen companies improve fundamentally over time, and yet their share price is 20% lower than before. You’ll learn that movement is your friend, allowing you to buy bargains when others are running for the hills. Trailing stops in this arena will only get you stopped out of a great position, while handing the house your money unnecessarily.

The fourth of my mining share market tips has to do with patience. If you have done your homework, or relied upon advice you trust, then you have to be patient. Not too long ago, I was growing incredibly inpatient with a company called Hathor. I had watched my other positions move nicely on a decent leg up. Hathor was just camping out; in fact, it was down a bit from previous highs. If anything, the company was a better investment than when I first took a stake. One morning I was increasingly disturbed, watching my capital stand still while other positions lifted like a hot air balloon. The next thing I knew, later that very day, all hell broke loose. It never looked back and continued climbing. It went from about $1.75 to $3.50 in a couple of months, for a nice double. The lesson is that, had I sold, I’d have been racing to catch a runaway train. I don’t see Hathor ever coming back to $1.75. As I like to say, you have to arrive at the party before there’s a party!

I have more mining share market tips for you. Fifth, at some level, accept the fact that you’re trying to catch a falling knife. There is a temptation to chase stocks. The bottom line is that I’ve been stubborn and refused to pay the extra penny to get on board. I’ve regretted it as the bus left the station. Specifically, I could have had Great Panther at $1.09. I therefore refused to buy it when I reconsidered at $1.38, on the grounds that it was now too expensive. I watched it go to over $2.00! I was later glad to get in at $1.71. I’ve also jumped on board with heart racing, only to see the stock go on sale. My best advice here is to take a partial position if you’re ambivalent. If you can’t decide whether to buy or wait, then do both! Get an initial “tranche,” and then keep some powder dry for a rainy day. If the stock runs away, at least you’re on board to some extent. If it goes on sale, average down and count your blessings!

Sixth, and for the last of my mining share market tips, let’s talk about market orders. If you are trading these stocks on the pink sheets in the United States especially, you will not want to use market orders. The bid-ask spread is far too great and you will get murdered. The market makers are glad to take you to the cleaners. Use strict limit orders, but heed the advice of the other mining share market tips, particularly number 5 above. Keep these things in mind and you can make a fortune in junior resource stocks, without having to spend it all on medicine for your migraines!