AVZ chart, page-3993

I agree that even without CFD leverage, there are some horror stories on HC with cult stocks such as BIG, FLC, TLS, GSW, and many more. Buying a penny stock like AVZ is a form of leverage in itself because of the large number of shares obtainable for a relatively low capital outlay.

The more I've experienced from trading over the years, either my own trades, passive 'paper trading', or finding out about stocks that go bankrupt, there are progressively more reasons NOT to be in a trade before buying. Take GSW for example, these type of chart patterns where price has collapsed well below the 200-day moving average, are higher probability permanent suspension from quotation candidates. Hence why I don't bottom fish for stocks trading well below the 200-day MA because the risk is too high.

If a stock starts to act weak and the stop loss or capital drawdown limit is reached, it is best to get out and calmly review the situation from the sidelines. This is what I did when I had a small trade with BIG. It is easier to calmly exit when the mindset is prepared in advance that it is always an option to buy back in later. The trader isn't necessarily permanently turning their back on a stock after they have just exited. But in the case of BIG, once it was trading below the 200-day MA, under no circumstances could I buy back in. That rule saved me from losing everything on that trade.

One other rule I have is to never place more than 10% of total trading capital on one stock. There are simply too many opportunities around within the ASX 500. Sector diversification also helps. Simple chart analysis also assists a trader avoiding the weak sectors such as Telcos and banks. Staying in these sectors is opportunity cost. Likewise, a trader with the bulk of their funds on lithium mining stocks has suffered opportunity cost during the last 6 months. Many would have even under-performed the All Ords index.