¶ Intro / Opening
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¶ Welcome & Jack's Early Drive
Hey there, traders. We are in episode 249, and I'm Tessa, co-host of Chat with Traders. It's so good to have you join us. If you're new to this podcast, thank you for being here. Warm welcome to you. If you've been a longtime listener, thank you for continuing to tune in with us. We've got a great episode for you. Starting out with juggling multiple jobs as a valet driver, firefighter, and entrepreneur.
Our guest, Jack Kellogg, at 18, about six years ago, dreamed of financial freedom, got laser focused on saving money, and learned everything he could about the stock market, and eventually turned to penny stock. Jack's intense drive for success pushed his mental and physical health to unhealthy levels. as he managed hundreds of trades and at times in illiquid, unregulated securities that often saw hundreds of percent increases, quickly followed by spectacular collapses within just a few weeks.
Today our host Ian Cox. takes us through a multifaceted discussion, including Jack's journey, which was met with setbacks and struggles, along with wisdom gained earlier than usual for someone so young. Jack's candid way of sharing is so refreshing, That I can't help but feel so drawn to the deeply human side of this talented young trader. Ladies and gentlemen, we are so pleased to present. Kalog.
Well, Jack, want to welcome you to Chat with Traders.
Hey, thanks for having me on. It's a real honor.
Like to dive in a little bit about your early experience and any goals that you might have set. How old were you when you set up your first brokerage account? And what was the catalyst for you to get into the field?
So coming out of high school, I wasn't necessarily the bad Reader, writer, etc. I didn't like literature. The only thing I really ever liked was simple math and video games. Um, I didn't really know too much that I could do with that. So I just kinda finished high school and knew college wasn't really an option for me. I got interested into firefighting because
of the work schedule where you work twenty four hours, then you have seventy two hours off. And I always wanted to be an entrepreneur to gain freedom for myself and my family eventually. and not have to show up to a job every single day over and over and not really have too much free time to work on anything else. So I got started with firefighting and while I was learning that I was also doing ballet, which was a great job. I was able to
Make decent money for an 18-year-old, 17, 16-year-old. And it was really cool because I was driving nice cars at a nice restaurant in Connecticut, Max downtown in the capital of Hartford. It was a great experience. And it it provided me a lot of inspiration with seeing the same clientele come in. every Sunday, Saturday, Friday for a nice dinner with their family. And it was really inspiring and motivational to see people with that kind of freedom where they can come and dine every week.
with a nice meal with their family and not really affect them because they have Freedom with money.
¶ Entry Into Penny Stock Trading
So I was very inspired to be an entrepreneur and have freedom. And as I got started into the firefighting stuff, I realized That I couldn't really make too much money doing that. Plus some stuff that I saw, it was uh kind of a turnoff at the beginning. So I shifted my focus and I tried opening a couple businesses. One uh selling stuff at a mall, kiosk.
Also selling stuff at a flea market and those were pretty much failures, but After a little bit of time, I had some money saved up, around$10,000 from the ballet job. My New Year's resolution in 2017 was: hey, I want to invest this money into some stocks because. I knew a lot of people were um making money through the stock market. And I just frankly didn't have enough money to get into real estate yet. Or at least I thought so. And after that, I ran into a buddy at the gym.
It was probably January 3rd, January 4th. I was in the process of opening up a Robin Hood account and I ran into a friend, my buddy named Lee. We were childhood friends. But he ended up going to a different high school to play uh competitive hockey. And we kind of lost we lost touch for a while. And I saw him a few years later and he was like, Hey. I'm getting interested in penny stocks, etc. I'm I'm trading penny stocks. You should see this, they're crazy.
Um, they move up hundreds of percent every day. I asked him like, hey, how can I I learn about this? This sounds interesting versus uh value investing, which would seem, I mean, it would take multiple years, if not decades, to make uh to see hundreds of percent return. So he was like, hey, you can get started with um Timothy Sykes, Investors Underground, et cetera, et cetera. And I went home and I I watched a few YouTube videos and I was pretty much immediately hooked.
I was still a little skeptical at the beginning, but eventually I saw this one supernova HTGM later that month in January of 2017 went from about two to twenty dollars. And I was like, wow, these really do happen. As well as this time was just a few months after dry ships and the shipping, the shipping sector. So I was able to look at previous uh hit.
your short-term history and see the crazy moves that had happened. So after that, I convinced my parents to split uh Timothy Sykes Millionaire Challenge. educational service with me. For the next year, I basically just studied and uh slowly bled out my my a few thousand dollar account.
Uh how how old were you uh at the time?
Uh I was like 18, 19 years old.
So your parents knew that you obviously had an interest in trading. What was their attitude toward this?
Uh, my dad was very skeptical and always called it a scam because he doesn't know anyone that's made money. uh trading penny stocks it was very new to him. So he was just trying to protect me and he's like, this is, you know, you should just become an electrician, work with your hands. That's what he is, an electrician, make money that way because you have to be very careful and he he's always very skeptical about everything.
Whereas my mom was more supportive. I could have told my mom I wanted to be anything and she would support me um in that way. But my dad was uh very negative towards it. So it was difficult, but I had my mom's support no matter what I did, which um I was thankful for.
Your early goals, if you had them, uh were they tied to any specific material desires that you wanted to acquire, like for example, a house or a fancy car?
Um honestly no. I wasn't really too the thing that motivated me the most and inspired me most was the freedom where you you could do whatever you want. So you don't I didn't really have like one, oh, I wanna buy a Ferrari or I wanna buy this house here. It was kind of just
I know I can buy those things, but I have to focus on gaining the freedom and growing my account. I know those things are very far away. And if I'm able to just focus on growth and gain consistency, that's what I really want. I want to be able to prove to myself that I can do this.
¶ Trading's Solitude & Community Support
What were the elements of trading that really grabbed you? Like what what makes trading fascinating for you?
Probably the most interesting thing to me was you you could do it in a dark room on the computer and what like you could just kind of do it. Without having to tell anyone that you're doing it. And you could just work hard without having to deal with coworkers and and other people that would get in your way. So I knew it was really me versus myself.
First in a lot of other areas areas and occupations in life, you you have people around you. Of course you have people on the internet that you talk to while you're trading, but you can kind of pick and choose. You can block people, you can say, hey, I don't want to talk to this person. You can mute stuff. So it's very easy to kind of pick where you want to fit in versus in a lot of other areas, you're almost like, hey, you have to do this, you have to do that, etc.
Mm-hmm. Did you find the early experience of trading uh lonely? I mean, you had your friend Lee. Um, did you have a support network of other fellow traders?
Um, no, I just had my buddy Lee and he was really great for showing me the basics, but around like three months of me learning, he kind of uh went into e commerce business and uh drop shipping and stuff like that. So he he kind of stopped trading. And then it got a bit lonely. Um and eventually I I I went to uh Tim Psykes conference in 2017. This was September, and I talked with a bunch of traders and I was able to develop relationships with them and
create this network and actually one of the guys who I met down there, he put me in a group chat and then I met this other guy who lived in Michigan. Uh his name's Dom. And I ended up moving moving into an apartment with Dom later in 2018 through towards the end of 2019. So it was lonely in the beginning, but I eventually found a few friends that that really helped.
So in your view, um, do you think it's important to have a support network? Uh w it was important to you?
At the beginning I didn't really want too many people kind of clouding my my view my viewpoint. Like I wanted a fresh mind of of what I think, but eventually After I learned about it, I realized that hey, I need a network and a support group to learn and grow with because it's very difficult to do it on your own.
¶ Learning from Early Trading Losses
Right. Yeah, that's a good point. Some argue that getting quick and easy profits early on is one of the worst things that can happen to a beginner trader. What's your viewpoint on this?
Yeah, I agree. Fortunately for me, I didn't make any money for the first 20 months really. I had a couple green months within there, but I would always end up just giving it back the next uh the next month, if not more than what I'd made. So it was constantly I I learned a lesson of of how easy it is to lose money over and over and over again where I I'd string together a bunch of small wins and then I just take a huge loss and I'd lose everything because I was stubborn.
And I I didn't realize that it's more about having big winners and and smaller, smaller losers versus trying to win consistently and and having maybe that one big loss here and there. Yeah, so for me, I I learned how to lose. And a lot of my my friends, a lot of my friends who started in in twenty twenty, twenty twenty one when we had the insane bull market, you know, they're going through a very rough patch right now.
where they're consistently losing and they're they're super frustrated and they have a lot more more money to lose. So it's a lot more dangerous just than losing a little bit of money, especially if you take on expenses and you and you have um payments and all that stuff versus
Even uh a couple of my friends started this year. Um, and I said, hey, it's a it's a great time to start, even though you don't think it is, but you're learning a process that's going to yield you as results over the long term as long as you stay disciplined and you learned it. You're not in this game just for a quick buck. If you want to really make money, you you have to trade a process for a decade.
Before you got into trading, uh did your family or friends uh consider you to be a risk taker, you know, perhaps expressed through any of your hobbies or interests?
I was never really into gambling or playing poker at all or any casino type games and I didn't really like um doing stunts or or any dangerous sports. Um so I would say not really.
Were any of them a little surprised uh when they heard that you were getting into trading penny stocks?
Really uh people's just first thought was they were more focused on just like the scam aspect. They thought that I was just getting scammed. Um, like my uncle printed me out uh this newspaper that I still have actually. And he was like, uh, why penny stocks are are scams? You shouldn't trade these, et cetera. And I think people were just more worried that I was gonna lose all my money and I I didn't really know what I was doing, et cetera.
¶ Demystifying Penny Stocks & Risks
Yeah, well that's a good segue for us to uh transition to the topic of the issues with penny stock. Let's define penny stocks. Are penny stocks any stock that's trading below a dollar on any exchange?
For me, I would classify penny stocks in like a couple different categories, right? I would say that all OTC over-the-counter stocks are penny stocks. Um, except for uh larger ones like um grayscale and that type of stuff. But if you're trading stuff that's, you know, subpenny stocks, uh trip stocks. Anything from 10 cents or less, a dollar or less, even$5 or less,$10 or less, whatever it is, as long as it has a small market cap, I would consider it a penny stock on the OTC market. And
A penny stock on small cap uh Nasdaq stocks, I would consider anything under five or ten dollars. Usually anything under a dollar is really, really a penny stock, but that's what I would say.
I see. So some stocks that you're saying that are trading below ten dollars or five dollars, they could be classified as a penny stock because their market capitalization is quite low.
Yeah. I mean sometimes there's no difference between a stock that's below a dollar with a a low market cap. They could just have more shares uh in the float. So it's lower price for something that they did a reverse split. It was trading at thirty cents, but they did a Uh 20 to 1 split and it's trading at six bucks now. It's the same company and the same stock, it's just higher price.
Oh, I see. I see. What about bid ask spreads? Are they a material issue for most over-the-counter penny stocks?
Yeah, it's definitely an issue, especially with a liquid ones that nobody's watching. You could see a 30, 40, 50% spread, maybe even 100% spread. But those aren't really the stocks that I'm looking at. I'm looking at for the most active stocks. Um, trading the most liquidity, trading the most on dollar volume, because that's where you're able to enter a position without taking huge risk because of the spread.
Got it. I noticed on the on the website otcmarkets.com that there were over 2,200. stocks that were listed showing a price of zero. And my question is, are stocks ever delisted from the uh over-the-counter exchange like is done in the Nasdaq or the New York stock exchange?
Yeah, so actually just Um late last year in September. The OTC market came up with a new rule where if you're not current and and pink whatever If you're darkened a font or you have this the caveat emptador or whatever, you actually they won't allow you to trade those anymore. So we lost a large majority, maybe like twenty five percent of the stocks that I had traded the previous two years just became non tradable anymore.
¶ Penny Stock Scams & Manipulation
Could you could you define a little bit uh caveat emptor? You're saying if they get labeled as that. That's a uh Latin word from my understanding is buyer beware. Uh how does a penny stock get that put on them.
So at first on OTC markets, you'll see them flagged for stock promotion where It's basically just a shell company for someone to manipulate it. Instead of spending five million dollars on a product or on an actual business, it's just a shell company and they're giving five million dollars. to a stock promoter and they're like, hey, you know, pump this stock up.
Um, well they'll kind of create this manipulated market where there's really nothing except um buyers and sellers and they're gonna try to wash sale um and have a lot of trades go through and Have people's eyes go on it where, like, hey, this stock's going up in value every single day. And they are trying to lure people into buy.
the stock and eventually they'll they're gonna sell, you know, their tens of millions of shares from 0.001 um average that the insiders have and they're gonna try to sell this at two, five, ten dollars and just try to sell as many shares as they can. And uh you'll see some of these stocks crash like 95% in one day. And if this after the stock usually crashes, the the OTC markets looks into it.
Um some not you don't really see them get the CE during the run up. It it's happened sometimes, but usually after the the stock crashes it this the CE gets put on. So They can't really, you know, pump it back again or or try to go for a round two. Um and they just they don't let people. And brokerages buy the stock anymore.
I see. So they do get an opportunity, it sounds like, to do one pump and get some money out of it, but uh then they're under investigation possibly after that, and then they may not get a second chance. Is that accurate?
Yeah, for the most part.
I see. Do penny stocks on the over the counter exchange ever evolve and move to the Nasdaq or the New York Stock Exchange?
Yeah, it it happens sometimes. There is this company, this ticker, L W L G. that moved from OTC to Nasdaq. And there's been a few more. Um, there's this one that actually went from OTC to uh NASDAQ and it was the single biggest runner of the entire year. It was AXTG or ATXG.
What uh
What was the ticker, Ben? Yeah, no. Yeah, ATXG, it it opened at like 10 bucks. And what happened was The people that had the shares from the OTC, they weren't allowed to sell right away. And everyone just started shorting it because we started seeing a lot of those stocks that IPO'd fade this year, especially Chinese scammy ones, OTC, whatever it's scammy. And everyone ended up shorting it and it actually went from like 10 bucks to it printed 2,000 uh at 2,000 um in after hours.
And uh I heard some horror stories that uh people were shorting in the tens, twenties, thirties, forties and covering at a thousand or or higher and blowing up their accounts. Um, so you do see just absolutely wild moves um in the OTC and sometimes if they do make it to the NASDAQ, they can even become more scammier.
Wow. Wow.
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¶ Why Jack Prefers OTC Trading
Uh, I'd like to transition into the perceptions of penny stocks. You know, some people have images of shady, immoral characters scamming people into buying near nearly worthless companies while pocketing outrageously large commissions like what we've seen in the movies, Wolf of Wall Street and Boiler Room. Other than your friend initially, you know, introducing you to Penny Stocks, uh, what characteristics of Penny Stock?
Got you attracted on the over-the-counter exchange. You know, and say instead of the seemingly safer regulated stocks on the New York Stock Exchange or NASDAQ.
I would say that the main reason I I mean I wasn't against trading Nasdaq at the beginning, but I just noticed that I had an act for OTC off the bat. I was able to read the stocks a lot more clear and Since they're not electronically market makered, it's actually um hand market makered. So you send an order to uh a route, whatever C Dell, night, and they're gonna manually put your order into the OTC stock.
So you're able to have more time to use the level two and the time and sales tape. And it just creates cleaner patterns and cleaner action to read. Um, and I was just like, okay, I think that um this dip's gonna hold, or I think if it breaks this level, it's gonna go up. And I noticed that I was just right more times than not on OTCs versus Nasdaq. There's a lot to uh it's electronically market make, there's more algos and it's just it was it was harder to read. So OTCs were just more clean.
I see. So did you consider the chart patterns to be more reliable?
Yes, exactly.
I see. Is there a lack would you say that there's not many institutional players or program trading in these type of stocks?
Yeah, I would say compared to to NASDAQ and and listed stocks, probably, you know, almost almost none. Um, because they just can't play the kind of market caps and liquidity that that OTC offers. But with a small account, you're you're able to grow, you're able to grow your money a lot. quicker a small amount. Versus uh and I was it was easier for me to read, so that's why I chose it.
¶ OTC Liquidity & Market Adaptations
Okay. Now turning to liquidity. Last week on a strong day for the NASDAQ and the S P 500, uh with both up over two 2% on the day, I noticed that out of the top 200 advancers on the entire OTC Markets.com site, only one had reached the$1 million total volume level, and the average trade was less than$1,000. Is this common during the years you've been trading penny stocks?
No. So in early twenty twenty one and late twenty twenty two, we were seeing um trillions of dollars in the OTC market. And it was really after that, um rule and regulation and and the SEC cracked down on it, we've seen a lot less um players and liquidity uh in OTC, but You have stocks like GTI or MMTLP, which just ran uh hundreds of percent with pretty decent liquidity over the last month. And those were some of the best runners we've seen this year. So it seems like it's kind of
coming back a little bit and due to to seasonality, my biggest um OTC months are always in February. I don't know what it is, but that's when there seems to be the most liquidity in OTCs, December and January as well. Um and then the rest of the year, I mean, OTCs are are really dead unless there's a a massive catalyst. Um, we've seen some good weed runs, some good Bitcoin runs um throughout the year sometimes and that.
causes some of the related OTCs to get some volume, but other than that, it's it's very season seasonal.
No, I see. So the current bear market in the major exchanges, uh, does that heavily influence the liquidity?
Yeah. The problem is right now is why we were seeing such a good OTC market is because speculation stocks were making highs over highs over highs in 2020 and early 2021. And then once uh Kathy would Fun topped when Bitcoin topped.
When all these speculation plays topped, we just saw OGCs die off because nobody wants to buy any more speculation because we're we started entering a bear market. And if if stocks like Apple and Tesla and Amazon and Um these bigger cap stocks, large cap stocks, they're not even going to hold their these uh BS penny stocks have zero chance.
Got it. So are you seeing widening bid ass spreads uh during this bear market?
Yeah, to like to tell you the truth, um, I've still made some money on OTCs this year, maybe like a hundred, two hundred grand, but Compared to what I made on them the last couple of years, like it's nothing. And I've been focusing more now on like um like uh TQQU, SQQQ, stuff with more liquidity and during the bear market.
there's a lot more volatility in the indexes. So that's kind of what I've been shifting into trade this year. And I'm not strictly like an OTC trader. It is what I did for If there is an OTC to trade, like I'll prefer that because I know that's what I'm best at.
But if there's no OTCs, I'm not going to sit there and force OTC trades. I'm going to use other strategies that I've developed over the years, but I'm always just not as confident in those setups because They're just not um what I've mastered, you're dealing with a lot more competition over there versus OTCs, you you almost um have such an advantage compared to uh stuff that's trading billions and billions of dollars.
I see. So are you concentrating more of your trading, say, on NASDAQ, or is there another exchange that you choose uh when the OTC exchange is um dead?
Yeah, so I'd I'd definitely concentrate more on my trading on NASDAQ when the OTCs are dead, but I'll still try to look for um scammy type moves to trade because they make the most sense to me. For example, Molin Automotive is a little scammy electric vehicle company that ran from 30 cents to 60 cents this week. Made a couple decent trades on it.
And
I will always prefer to trade stuff like that. I don't like trading biotax or or stuff where there's Um, you have to understand more with the fundamentals. I I like just trading stuff that's doing massive volume and it's just a straight scam because the price action makes way more sense to me.
¶ Jack's Trading Process & Indicators
Got it. Well, let's actually get into your process. Have you ever been a discretionary trader or did you develop a process early on? Well, when you first got into trading stocks, were you uh purely discretionary or did you have certain things that you looked for, like a certain checklist for you to get into a trade?
Yeah, so I really just looked for simple patterns, like the patterns that really have made me the most money over the last five years is just Buying buying breakouts in a strong market. So waiting for a stock to spike, waiting for it to pull back, and then waiting to buy a breakout. I like doing it on scams because the price action is usually the most clean.
And and then shorting um stocks that get way too overextended. And when they're if you know if a stock's up three to five days in a row, it's going up every single day. I'm looking for that first day where it kind of just falls off a cliff.
Uh to short and then I also like um uh panic dip buying, like if there's a huge crash, uh making sure that you have to be careful with that because um panic dip buying i've took some pretty um nasty losses there because i sometimes i just don't understand where the selling pressures come from and i didn't do enough due diligence. But um if it's a natural type selling pressure due to stock losses.
And not um some massive dilution. There's usually a good uh bounce. And I've really just used those three patterns over the last five years to I just traded those and uh continue to scale them up as If I'm making money, I'm using more size. If I'm losing, I'm using smaller size. And I'm just letting the the market and momentum decide how much I'm going to size into. So that's a very simple explanation of what my process is.
Okay. So are you looking for uh say a certain amount of volume above average or breaking uh key technical resistance level?
Yeah, so the number one thing for me is volume because the more volume is, the less um risk you have. because there's you're not gonna get into a situation where if you buy or you short, that it just opens up huge, the spread opens up and you end up taking, you know, three, five times where you're planning to risk. And uh the slippage can be really detrimental on a liquid stock.
And for me, the the best trades that I do are stocks that have the most volume. So I can size in and I can get out if it's not working. And then I'm looking for volume as my number one indicator. And my number two indicators, I'm looking at technical levels. I'm looking at the history of the stock to see has the stock performed clean in the in the history or has it been super choppy and annoying? How did the daily candles look?
Right. I don't want to trade stocks that are super wicky. I wanna see a nice full body candle. Meaning it it opens near the low of the day and it closes near the high of the day. I don't want to be trading stuff that spikes huge and then comes all the way back in, or vice versa, um, has a huge drop and then comes all the way back because Those are where I'll I'll take my biggest losses.
Um because uh if something drops 50% and then bounces 300%, I'll usually um short it into the bounce and get blown out. Or if something, if I'm long something and the bottom just or the It just starts selling off super bad. I'll end up also taking a big loss there. So I'm looking for nice, clean, daily candles.
¶ Major Losses & Risk Management Lessons
Okay. Have you experienced any large losses due to um liquidity drying up?
Yeah. Um I have uh two of my biggest losses. One came from um MMNFF, which was an OTC runner. Uh in February of 2021, it spiked from 30 cents to like a dollar thirty over three to five days. I ended up shorting it at the open at like a buck 20 and I covered it at 90 cents. And it was a good trade. Maybe I made like 50 grand on it. And then I started um buying uh the dip and
Started by like 90, 80, 70, whatever, maybe had like an 80 average. And I I noticed I just had way too much size for the volume that the stock was trading. I I had like two million shares or something and the stock bounced a little bit and I was up a little but I just couldn't execute my sell order because there wasn't enough volume or enough bidders and I ended up just kind of sitting in it all day waiting to I was slowly selling it slowly selling it.
And then at one point it just was 2 p.m. and it wasn't bouncing and it was at like 50 cents. I was like, I or it was at 60 cents. I was like, I just gotta get out of this. And I sold my position and the stock was at 60 cents, but I didn't even execute my majority of my shares till 50 cents. Oh wow. Um I ended up losing like over three hundred thousand dollars on that trade. And then Another trade. I was shorting this.
uh Chinese um stock that ran from ten dollars to I started shorting it at 200 bucks and it had really bad liquidity where the spread was 10, 15, maybe it could open up to 20 bucks on the spread and The day before they tricked me because the spread was really tight and it was trading a lot more liquidity and the price action was clean. And then the next day um they just dried up the liquidity because it was a scam.
And I started shorting it and they had control of the the float. And I ended up shorting at like 200 and I covered at 250 for it wasn't a huge loss. I maybe lost like$100,000. I short like a couple thousand shares. It was more than I wanted to risk though. I wanted to risk like 210, 220, lose like 20, 30, 40 grand, whatever. Um and try to make a hundred grand if it went to a buck fifty because it was super extended.
And then um it went up and it started going parabolic to 400 bucks. And I started shorting again because it was just getting so ridiculous. And uh ended up maybe losing another 50K on it, just chopping myself up because it never dropped and the liquidity got even worse. And then the next day, um, it was trading at like 700. So I was like, I have to try this again. The stocks up from 20 bucks to 700.
Um, started shorting and I I decreased my position size so I could deal with the a liquidiness. And I ended up uh losing another like a hundred points on it, totaling my losses to like two, two fifty, two, three hundred K.
And then I tried it one more time. The stock went super complete supernova to two thousand five hundred per share. And I was short at the top of the stock. I had um a small position short from like 2400 and my broker said hey like you can't swing this overnight it's way too risky and uh ended up covering and the spread at that point was like three four hundred bucks. And I ended up uh losing maybe like another hundred K on it.
So my total losses on it was like four hundred thousand. And then the next day it gapped down um like a thousand points or something and started trading.
And it it slowly faded off and now the stock's at like twenty bucks or something. Uh but it just the look the liquidity um just dried up and made it impossible to trade and it just went way further than I expected, but Uh my number one mistake there was I should have just hung up the cleats on it after it proved not to be a good trader after the day um that they proved for to be a good trader.
Wow. What a story. Uh so why did the broker um not allow you to hold it overnight? Were you in a margin call situation?
No, um they they were just lending out fake shares, right? So in my um I'm not gonna name the broker, but in my um humble opinion Uh it was naked shorts. So um they weren't allowing people to um hold it overnight because they didn't really have shares. They were just lending shares out um out of thin air. So they don't have the locate to let people hold this overnight.
Oh wow. Uh so as a result of this uh experience, did you set a rule for yourself um so that in future trades you would have a maximum uh position size, say percentage, uh as a percentage of dollar, total dollar volume.
Yeah, I would say that For now, now I've really learned my lesson where the last year I I was aware of a liquidity a liquid stocks, but I've never experienced a scam go to 2500 bucks and at the time it was like top 10 New York stock exchange stock on the market and the market cap I think was like 500 billion dollars. And the company has zero revenue. It's a complete um scam.
I just never really expected that to to ever happen. And it was just a good learning experience that I I really learned how people actually blew up because before I would hear stories. Of like hey, this guy's blowing up on on this and I'm like I mean, like why? And now like I understand like wow, like this really could happen. If if I just shorted at 200 bucks and I held um 2,000 shares, I would be down like 4 million at the top and I would have blown up my um shorting account.
So it really opened my eyes to what could really happen. And now if I'm going to trade a liquid stocks, like I'll position myself with a hundred thousand dollars in the stock. If you start pushing like a three, four, five hundred thousand dollar position, that's when it gets really scary because all it takes is a hundred percent to lose uh multiple uh six figures. And for me, like I'm I can take uh thirty, fifty, seventy K losses, they still hurt, but that's like
the most I'm willing to lose on something that's super extended in in the liquid. And sometimes like they they end up working and I can make a few hundred thousand uh if they start to to sell off. But For me it's just all about the position size. I really don't want to size in more than like a hundred fifty thousand dollars into it.
Uh-huh. Yeah, I would encourage all our listeners to go check out uh the chart on HKD. It is uh quite uh shocking to see the movement that it made. Do you use leverage?
No, I mean... I will use leverage. I have different trading accounts. So like if I'm day trading something, I will never use leverage. I've started trading uh like bigger cap stocks, like um I've made a couple of uh investments into this bear market and
I do use leverage on that trading account, but I'm never using more than like 1.2, 1.3 leverage. Um, because I know those stocks aren't gonna make a 50% move down against me without me having time to react to to cut because it it'll prove itself um over the long haul, like hey, this is breaking support levels, I gotta get out, the market's looking bad, etc.
Versus um day trading, I will never and ever use leverage because how crazy the moves can happen and how unpredictable the moves can happen. And uh that's the only way I'm using leverage. And I'm not really even using leverage because I have M my account spread out. So it's not like I'm um betting like my entire net worth plus some, if that makes sense.
¶ Holding vs. Shorting Penny Stocks
Uh-huh. So what are what conditions do you need to hold penny stocks for multiple days or weeks versus say just day trading them?
I would say that I need like seasonality, huge volume, seeing people make money. So one of my biggest indicators, I had a bunch of thousand percent winners back in December of 20 uh 2020 into February of 2021 because I kept seeing all these Joe Schmoes making um thousands of percent. And I'm like, I'm like, how how are these people making money? And I was like, at some point you just have to realize like people.
who don't know a lot and people who are just buying into uh scams and they're and they're going up, like a lot of people would be like, Hey, these guys are idiots, they don't deserve to be making money. I'm gonna short this stuff but Sometimes like people like that are they're smart for a very narrow um window, right? But the problem is people never sell.
And it comes back in and they think it's gonna be the next apple. But if you just take advantage of that huge move up and you're not, you don't fall in love with the company, um, you can make money. So I started seeing a lot of people make money. And I started seeing OTC stocks just running like crazy. So I started buying stocks that were in um hot sectors, electric vehicle, uh, electric vehicles, bitcoins, weeds.
Um, just low price stocks trading huge volume with a big story, et cetera. And I bought a lot of those and I probably made 10 to 20. Um 500 to a thousand percent winners. And some of them I sold way too early. And they I could have made like uh like I was buying some stocks at like point oh oh six, point oh oh three, point oh oh nine. One cent, three cents, and these stocks were going 10 cents, 20. Um, the bit the biggest winner in all of OTC.
Which had um phenomenal liquidity was TSNP. Now they merged the company um and now it's HMBL and it went from point oh oh two. to um over two bucks. They also did it will show that the high is like seven or eight now because once they merge. They also did a reverse split or whatever and the the price went higher. But yeah, one of my friends had bought uh 50 million shares of it at.00 uh oh one and yeah, he put about five thousand dollars into it at
Nothing and at the top it would have been worth like uh ten million dollars or a hundred million dollars. Um And he put like five grand into it. But it would have been impossible to sell all those shares up there, of course, because it was still trading good volume, maybe like twenty, thirty million shares a day. But um yeah, that that's the possibility if you if uh
something crazy happens and you get into a crazy market like that. And we saw a lot of those just go from dubs and trips to 50 cents a dollar. So and now it's trading back at two cents though.
Oh wow. Oh God. Uh So are you ever able are you more emboldened to take on larger short positions in a penny stock or hold short positions longer because of the higher likelihood that whatever fake news uh or hype that caused these? type of stocks to spike will reverse quickly.
Um, there's a couple of problems with shorting and holding. Like the number one thing being there's a very expensive um short interest, like If everybody knows of the scam, everybody's gonna be shorting it and the the interest will be 500 to a thousand percent to hold it overnight. So that just recently happened with uh the ticker GTII. It ran from what was it like 80, uh 60 to 80 cents, topped at like nine or 10 cents uh last month.
And I was shorting it um seven, eight, and it it ended up cracking all the way down to like two or three, but I just couldn't justify myself holding 20,000, 30,000 shares short.
and paying like five, seven, eight thousand dollars a night in uh overnight interest. So I I had a good trade on it the day that it was volatile and it just ended up going sideways for about a week. So you would have ended up um paying like thirty or forty thousand just to hold it short, which would have ended up paying you money uh if you covered it at two from like six. Um, you would have made good money, but for me, the stress and um
Also the uncertainty. Hey, what if this isn't right and it starts going back up? Um, I'm taking a loss plus I'm taking a huge loss in in overnight interest. So I I really don't like swinging. Um the penny stocks overnight that are scams, I just like day trading them when I like capturing the day that they're gonna dump twenty to fifty percent and uh
Covering my shares that day. And then maybe the next day, I shorted again, small size, and try to capture another morning panic. But I don't like holding for more than a week or two personally.
Excuse the last interruption here. This is Tessa. We hope you're enjoying this episode so far. If you love the podcast, Please give Chatwith Traders the best review you can on whatever platform you're listening from. This will help us to keep the episodes coming. Also, if you haven't subscribed to our email list, please hop on to chatwithraders.com and click on subscribe. so we can keep you posted of information that may be of importance. Thank you. Now back to the chat with our guests.
¶ Mindset, Well-being & Work-Life Balance
Yeah. I'd like to move towards uh talking about the mindset in trading. I'm curious to hear how do you emotionally detach yourself from the amount of money that you're winning or losing and keep your cool.
Um, I would say at the beginning it was really hard because a thousand bucks here, a thousand bucks here, five hundred bucks there went a long way. And it still does. Um, that's still really good, really good money. But Now I I have large enough accounts where I don't really even notice like my account go up or down. At the beginning, I'd be like watching it slowly grow, like two hundred K, three hundred K, five hundred K, seven hundred K, whatever, et cetera. And it keep going up. But now
If I'm trading and my account has like two point two million or two point three million, it doesn't really like matter to me. Uh as much anymore. I don't really uh pay attention to it as much because I I've seen so many numbers flicker in my life. So I guess you just kinda get numb to it. Mm-hmm.
Do you consider trading to be a uh a sport?
Yeah, I would say it's it's definitely a sport. Um you're competing against everyone else. And usually the people that put in more work, like they're going to be more uh profitable and they're they're going to out trade you because they're they're working harder. So the more work you put in, it's the same with sports. If you're in the gym short shorting uh shooting free throws every single night. you're gonna be able to make those free throws in the game vers someone who just doesn't practice.
Good point. Um, what about personal care? Uh when you're striving toward your trading goal. Upon reflection, did you think you were making major health or relationship sacrifices?
Yeah. I in in uh twenty nineteen, twenty eighteen when I was living um in Michigan, I had no car. Uh I had like one or two friends. And I would just sit in the office and just study and watch the market all day, every day. And the market was um not very good back then. So it was just super depressing because I was working so hard.
And I was barely making any money and I really had to fight for every dollar that I was making. Plus I had bills to pay. Um plus I had to pay rent and stuff like that, groceries. So it was super um depressing. And that was when I was really sad and then um ended up moving back home. And I had a car again and I had more friends and that was that was nice and I started getting um more happy and then the market turned on to um the market just started going crazy and I knew
How hard I was working in 2019. So I used all that energy. And I I feel like this is what kind of separated me between a lot of other people. Um is that they didn't work as hard because they wouldn't grind as hard and put themselves through depression to learn the market in 2019 and and 2018, 2017. Um, and I just wanted it so bad that I was willing to do anything and tell anyone to leave me alone. Like I'm focused and I was so zoned in and so much tunnel vision.
I ended up getting super sick in 2020, 2021, um, 2020, uh got COVID, traded through it, and then towards the end of the year was my worst sickness. I got um mono and strep throat at the same time. And I was so beat up. Um, but the market was so hot. This was in December of twenty uh twenty. And I just continued um to trade through it and
ended up really just like putting myself into a habitual burnout where I I had no energy for like two or three years. Like I was so sluggish. I was so irritable. And but I knew like this is what had to be done to get where I wanted to be. And now this year, um I've made sure like, hey, if the market's not good.
I'm not gonna sit here and trade all day. I'm gonna go I've been go traveling a ton this year. I get um massages weekly. I make sure to get outside and go for a walk every day. I make sure to exercise. This was nothing I was doing. I was just sitting in front of the computer screens.
all day, every day, um, the last couple of years. And I had to uh reteach myself how to have fun because when people were having fun um the previous three years I wouldn't even allow myself to have fun because I just wanted to focus on trading and that's the only thing that mattered. And uh now I I love having fun and I I re taught myself how to have fun and uh picked up I've probably picked up like thirty to fifty hobbies this year, stuff that um
I used to love when I was a kid and I just stopped liking them because I was so focused on trading. So it's been a a nice shift and this has been one of the better years of my life because now I have the freedom. um to do what I want and I'm still making money in the market and I'm not as stressed out.
Wow, that's great that you're learning uh how to get some balance um between trading the markets and taking care of yourself. Uh, have you developed since processes are important um when trading the market, have you explored developing processes for other areas of your life, like, you know, diet, exercise?
Yeah, I I definitely have. Um, I would say like the main thing is I've really just been focused on like schedule driven this year. So I I get up at a certain time, I I do certain stuff throughout the day. I usually make a certain breakfast and I get outside at a certain time so Every if every day that I'm home and it's a regular work day, I have a specific process. I'm doing my Excel work at a specific time, etc.
I think that's um definitely have learned that type of discipline through um trading. And but when I go on vacation, I kind of just I don't really follow a process. I just um do what I can to experience the most that I can.
Uh-huh. What would you say to your fellow trader regarding mindset and personal care? Any tips?
Um, I would say like the number one thing for me that I regret that I didn't do was I didn't stretch enough of my upper back and I developed a lot of knots. And also I got a lot of sickness because I wasn't taking vitamin C and I wasn't seeing the sun. So my number uh my two top tips are to get outside every day and and just make sure that if you are feeling stressed, just to use a massage gun.
or to stretch your upper back area a lot because you you really can develop nasty knots that that don't go away and significantly decrease your light. And happiness. Mm-hmm.
¶ From $20K to $11M & Giving Back
Mm-hmm. Great advice. My understanding is that your process and your discipline and strategies helped you turn just$10,000 into over$6 million in just four years. Has your lifestyle changed throughout your trading successes?
Um, I I turned about I had 10,000, but then I kept working my valet job and um I ended up uh starting and my mom also um gave me my mutual fund too, um supporting me. And I ended up starting with like 20 to 30 K, kind of in between that range. And uh I've turned that now into almost eleven million in profits. Yeah, after taxes, I'm I'm clear, I'm obviously not, I don't have 11 million. Um, but that is how much I've made in my career. ナイス
Nice. I mean, did you modify your lifestyle over that time period or?
Um, meaning like what have I done for myself?
Y yeah, like I mean, do you some people imagine, well, you know, as soon as I get my first million, I'm gonna buy this or buy that, or um, you know, take a nice long vacation to some fancy place. Um, did you modify your lifestyle much?
Well, when I hit my million dollar mark, it was in November of 2020. And I I couldn't enjoy myself because the market was so crazy that I had to stay focused. Um, and the next month I ended up making 800,000, almost doubling what I had already made. Um, and I was just so focused. And then the next month I made um like a million and a half and the next month like 2.5 or something. And
During that stretch like I I wasn't even realizing how much money I was making. I was just trading because there were so many opportunities and I was just doing whatever I could. Um, and at one point, like I couldn't even keep up with my Excel work or like tracking how much I was making or losing. And I was just trading. Um at one point I had like um 70 to 100 positions on overnight every single night.
And um I I couldn't even begin to think like, hey, I need to do I need to uh buy this or buy that. But it was only after Um I finished like that hot wave and then I could say, hey, the market's slowing down. I only made I tried really hard this month. I only made ex a hundred grand compared to like my other few months. And then I started saying, like, hey, what can I do now with this with this cash? So I ended up one of the first things that I did was.
I withdrew 50,000 or 100,000 from the bank and I gave my my parents um 50,000 each. Uh on my twenty on my twenty-third birthday, um, which was about a year and a half ago. And that was the first thing that I did. And then the second thing that I did was Uh the next month after that, I bought a car. Uh nothing crazy. I got a Nissan 370Z, fun little summer car.
And after that, um I've bought a I've bought a couple watches. Just I like them because they they hold value and also take some um some cash out of your account and giving you some physical value. That was really it. I bought my girlfriend um some nice presents throughout the years. Really the only other thing is um I spent a lot uh on travel and experiencing stuff through this year and and late last year. Um I've been to Italy, Greece. Um I have
a trip coming up soon. Uh I'm going to Norway, Sweden and Denmark for a food tour. Going to be eating at the top five or five out of the 12 best restaurants in the world with also the the I am eating at the top rated restaurant in the world. And that's like an experience that um I'm really excited about. Um other than that, um taking uh learning uh photography and s and stuff like that.
Great. Yeah, that sounds like a fun uh adventure you're gonna go on. Uh
Yeah.
Yeah. Uh yeah, that video that I saw of you going to the bank on your twenty third birthday, that was really impressive. I mean, withdrawing you know all that money and cash and then, you know, giving it to your mom and dad as Thanks for being good loving parents to you. I you know, I can't forget the expressions on your parents' faces. It was uh very moving.
Thank you, man.
¶ Final Advice for Struggling Traders
Yeah. So in closing, what would you say to traders who are losing money?
Um, first off, like this year's been very difficult and I would say that the last couple of years like it was relatively easy to make money. Um as long as you had some type of process. It didn't even have to be that discipline because um Everything was just there's so much volatility and volume and and now it it's very difficult and
This type of year is the best to learn in because it's really going to teach you your discipline and it's going to teach you a process. And if you don't follow that process and discipline, you're going to lose money consistently. But if you are disciplined, Um, you'll be able to make um small consistent money and just know that eventually um a hot wave will come back around.
And that's when you scale up and that's really going to be the difference maker in your account. And if you are prepared and you have been working on your process this entire year, you're going to be able to do great things.
so just
Have some patience and continue to work every day, even if it's demotivating. I know how it feels. I I worked every single day for months and years without really turning a profit. But all it takes is uh one month really to grow your account um a a hundred, two hundred percent. And then from there, if you keep compounding it, you'll you'll be Surprised by how exponential it could potentially go. You have the right process and you have the right market lineup.
Yeah, great advice, Jack. It was uh thanks for coming on Chat with Traders. It was great having you on the show.
Yeah, thanks for having me. It was really a pleasure uh to speak with you, Ian.
Yeah. How how can our listeners get in touch with you? Uh
I have my Twitter's Jackaroo underscore trades. My Instagram is just my first and last name, Jack Kellogg. Kellogg's K-E-L-L-O-G-G. A lot of people just put one G, has two G's. Some of my uh trades are posted on Kinfo um and Profitly, a couple of uh third party verification softwares that I use and that's about it.
Great. Thanks for sharing, Jack.
Thank you.
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