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Markets, speculation, and risk.
This is the Chat with Traders podcast.
Hey there traders. We are on episode 249, and I'm Tessa, cohost 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 long time 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 stocks.
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 Jack Kellogg.
Well, Jack, wanna 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 best reader, writer, et cetera.
I didn't like literature.
The only thing I really ever liked was simple math and video games.
I didn't really know too much that I could do with that.
So I just kinda finished high school and new college wasn't really an option for me.
I got interested into firefighting because of the work schedule where you work 24 hours, then you have 72 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 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.
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 kind of a turn off at the beginning.
So I shifted my focus and I tried opening a couple of businesses, one 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 valet job.
And 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 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 Robinhood 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 a 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, et cetera.
I'm trading penny stocks.
You could see this, they're crazy.
They move up hundreds of percent every day.
I asked him like, hey, how can I learn about this?
This sounds interesting versus value investing, which would seem, I mean, it would take multiple years, if not decades to see hundreds of percent returns.
So he was like, hey, you can get started with Timothy Sykes, investors, Underground, et cetera, et cetera.
And I went home and 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 $20.
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 sector.
So I was able to look at previous hit your short term history and see the crazy moves that had happened.
So after that, I convinced my parents to split Timothy Sykes, millionaire challenge educational service with me.
For the next year, I basically just studied and slowly bled out my a few thousand dollar account.
How old were you at the time?
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?
My dad was very skeptical and always called it a scam because he doesn't know anyone that's paid money trading penny stocks.
It was very new to him.
So he was just trying to protect me.
And he's like, 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's always very skeptical about everything.
Whereas my mom was more supportive.
I could have told my mom I wanted to be anything.
She would support me in that way.
But my dad was very negative towards it.
So it was difficult, but I had my mom support no matter what I did, which I was thankful for.
Your early goals, if you had them, were they tied to any specific material desires that you wanted to acquire, like for example, a house or a fancy car?
Honestly, no. I wasn't really too, the thing that motivated me the most and inspired me most was the freedom where you could do whatever you want.
So I didn't really have like one, oh, I want to buy a Ferrari or I want to 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.
What were the elements of trading that really grabbed you?
Like what makes trading fascinating for you?
Probably the most interesting thing to me was 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 other people that would get in your way.
So I knew it was really me versus myself versus in a lot of other areas and occupations in life, 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, et cetera.
Did you find the early experience of trading lonely?
I mean, you had your friend Lee.
Did you have a support network of other fellow traders?
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 went to e -commerce business and drop shipping and stuff like that.
So he kind of stopped trading and then it got a bit lonely.
And eventually I went to Tim Sykes' 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.
His name is Dom. And I ended up moving into an apartment with Dom later in 2018, towards the end of 2019.
So it was lonely in the beginning, but I eventually found a few friends that really helped me.
So in your view, do you think it's important to have a support network?
It was important to you?
At the beginning, I didn't really want too many people kind of clouding my viewpoint.
Like I wanted a fresh mind 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 these.
It's very difficult to do it on your own.
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 of green months within there, but I would always end up just getting it back the next month, if not more than what I'd made.
So it was constantly...
I learned the lesson of how easy it is to lose money over and over and over again, where I'd string together a bunch of small wins, and then I'd just take a huge loss, and I'd lose everything because I was stubborn.
And I didn't realize that it's more about having big winners and smaller losers versus trying to win consistently and having maybe that one big loss here and there.
Yeah, so for me, I learned how to lose.
And a lot of my friends who started in 2020, 2021, when we had the insane bull market, they're going through a very rough patch right now where they're consistently losing and they're super frustrated and they have a lot 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 have payments and all that stuff versus even a couple of my friends started this year.
And I said, hey, 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 results over the longterm, as long as you stay disciplined and you learned it.
You're not in this game just for a quick buck.
If you wanna really make money, you have to trade a process for a decade.
Before you got into trading, did your family or friends consider you to be a risk taker?
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 doing stunts or any dangerous sports.
So I would say not really.
Were any of them a little surprised when they heard that you're getting into trading penny stocks?
Really people's just first thought was they were more focused on just like the scam aspect.
They thought that I was just getting scammed.
Like my uncle printed me out this newspaper that I still have actually.
And he was like, why penny stocks 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 didn't really know what I was doing, et cetera.
Yeah, well, that's a good segue for us to transition to the topic of the issues with penny stocks.
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 of different categories, right?
I would say that all OTC over the counter stocks are penny stocks, except for larger ones like grayscale and that type of stuff.
But if you're trading stuff that's sub penny stocks, 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 NASDAQ stocks, I
would consider anything under five or $10.
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 $10 or $5, 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 low market cap, they could just have more shares in the float.
So it's lower price for something that they did a reverse split.
It was trading at 30 cents, but they did a 20 to one reverse split and it's trading at six bucks now.
It's the same company in the same stock, it's just higher priced.
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 it 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, 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 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 over -the -counter exchange like is done in the NASDAQ or the New York Stock Exchange?
Yeah, so actually just late last year in September, the OTC market came out with a new rule where if you're not current and pink, whatever, if you're darkened a font or you have the caveat emptador or whatever, they won't allow you to trade those anymore.
So we lost a large majority, maybe like 25 % of the stocks that I had traded the previous two years just became non -tradable anymore.
Could you define a little bit caveat emptor?
You're saying if they get labeled as that.
That's a Latin word from my understanding is buyer beware.
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 $5 million on a product or on an actual business, it's just a shell company.
And they're giving $5 million to a stock promoter.
And they're like, hey, pump this stock up.
Well, they'll kind of create this manipulated market where there's really nothing except buyers and sellers.
And they're gonna try to wash sale and have a lot of trades go through and have people's eyes go on it.
We're like, hey, this stock is going up in value every single day.
And they are trying to lure people into buy the stock and eventually they're gonna sell their tens of millions of shares from 0 .001 average that the insiders have.
And they're gonna try to sell this at two, five, $10 and just try to sell as many shares as they can.
And you'll see some of these stocks crash like 95 % in one day.
And after the stock usually crashes, the OTC markets looks into it.
You don't really see them get the CE during the run -up.
It's happened sometimes, but usually after the stock crashes, the CE gets put on so they can't really pump it back again or try to go for a round two.
And they don't let people in 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 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 happens sometimes.
There's this company, this ticker, LWLG, that moved from OTC to NASDAQ.
And there's been a few more.
There was this one that actually went from OTC to NASDAQ and it was the single biggest runner of the entire year.
It was AXTG or ATXG.
What was the ticker Ben?
Yeah, that one was like 700.
Yeah, ATXG. 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 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 at 2000 in after hours.
And I heard some horror stories that people were shorting in the 10s, 20s, 30s, 40s, and covering at a thousand or higher and blowing up their accounts.
So you do see just absolutely wild moves in the OTC.
And sometimes if they do make it to the NASDAQ, they can even become more scamier.
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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, what characteristics of penny stocks 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 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 maker, it's actually a hand market maker.
So you send an order to a route, whatever, CDEL night, and they're going to manually put your order into the OTC stock.
So you're able to have more time to use the level two and the time in sales tape.
And it just creates cleaner patterns and cleaner action to read.
And I was just like, okay, I think that this dip's going to hold.
Or I think if it breaks this level, it's going to go up.
And I noticed that I was just right more times than that on OTC versus NASDAQ.
There's a lot, it's electronically market maker.
There's more algos and 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 types of stocks?
Yeah, I would say compared to NASDAQ and listed stocks, probably almost none.
Because they just can't play the kind of market caps and liquidity that OTC offers.
But with a small account, you're able to grow.
You're able to grow your money a lot quicker, a small amount.
And it was easier for me to read, so that's why I chose it.
Okay, now turning to liquidity.
Last week on a strong day for the NASDAQ and the S &P 500 with both up over 2 % on the day, I noticed that out of the top 200 advances on the entire otcmarkets .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 2021 and late 2022, we were seeing trillions of dollars in the OTC market.
And it was really after that rule and regulation and the SEC cracked out on it.
We've seen a lot less players and liquidity in OTC but you have stocks like GTII or MMTLP, which just ran 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 seasonality, my biggest 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.
And then the rest of the year, I mean, OTCs are really dead unless there's a massive catalyst.
We've seen some good weed runs, some good Bitcoin runs throughout the year sometimes.
And that causes some of the related OTCs to get some volume but other than that, it's very seasonal.
I see, so the current bear market in the major exchanges, does that heavily influence the liquidity issues?
Oh yeah. It does. 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 Cathie Woods, fun -topped when Bitcoin topped, when all these speculation plays topped, we just saw OTCs die off because nobody wants to buy any more speculation because we started entering a bear market.
And if stocks like Apple and Tesla and Amazon and these bigger cap stocks, large cap stocks, they're not even gonna hold their...
These BS penny stocks have zero chance.
Got it. So are you seeing widening bid -ask spreads during this bear market?
Yeah, like to tell you the truth, I've still made some money on OTCs this year, maybe like a hundred, 200 grand.
But compared to what I made on the last couple of years, it's nothing.
And I've been focusing more now on like 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, I'll prefer that because I know that's what I'm best at.
But if there's no OTCs, I'm not gonna sit there and enforce 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 what I've mastered.
You're dealing with a lot more competition over there.
First OTCs, you almost have such an advantage compared to 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 when the OTC exchange is dead?
Yeah, so I definitely concentrate more of my trading on NASDAQ when the OTCs are dead, but I'll still try to look for scammy type moves to trade because they make the most sense to me.
Like for example, Molen Automotive is a little scammy electric vehicle company that ran from 30 cents to 60 cents this week, made a couple of decent trades on it.
And I will always prefer to trade stuff like that.
I don't like trading biotechs or stuff where there's, you have to understand more with the fundamentals.
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.
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?
What do you mean by that?
Well, when you first got into trading stocks, were you 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 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 then shorting stocks that get way too overextended.
And when they're, 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 to short.
And then I also like panic dip buying, like if there's a huge crash, making sure that you have to be careful with that because panic dip buying took some pretty nasty losses there because sometimes I just don't understand where the selling pressures come from and I didn't do enough due diligence.
But if it's a natural type selling pressure due to stock losses and not some massive dilution, there's usually a good bounce.
And I've really just used those three patterns over the last five years to, I just traded those and I 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 market and momentum decide how much I'm gonna size into.
So that's a very simple explanation of what my process is.
Okay, so are you looking for say a certain amount of volume above average or breaking key technical resistance levels?
Yeah, so the number one thing for me is volume because the more volume is the less risk you have because you're not gonna get into a situation where if you buy are you short, that just opens up huge, the spread opens up and you end up taking three, five times where you're planning to risk and the slippage
can be really detrimental on a liquid stocks.
And for me, 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 history or has it been super choppy and annoying?
How did the daily candles look?
I don't wanna trade stocks that are super wiki.
I wanna see a nice full body candle, meaning it opens near the low of the day and it closes near the high of the day.
I don't wanna be trading stuff that spikes huge and then comes all the way back in or vice versa.
Has a huge drop and then comes all the way back because those are where I'll take my biggest losses because if something drops 50 % and then bounces 300%, I'll usually short it into the bounce and then get blown out or 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.
Okay, have you experienced any large losses due to liquidity drying up?
Yeah, I have two of my biggest losses.
One came from MMNFF, which was an OTC runner.
In February of 2021, it spiked from 30 cents to like a $1 .30 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 buying the dip and started buying 90, 70, whatever, maybe had like an 80 average and I noticed I just had way too much size for the volume that the stock was trading.
I had like 2 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 2pm and it wasn't bouncing and it was at like 50 cents 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.
I ended up losing like over $300 ,000 on that trade and then another trade, I was shorting this Chinese stock that ran from $10 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 they just dried up the liquidity because it was a scam and I started shorting it and they had control of the float and I ended up shorting it at like 200 and I
covered at 250 for, it wasn't a huge loss, I maybe lost like $100 ,000, I shorted 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 and try to make 100 grand if it went to a buck 50 because it was super extended and then it went up and I started going to Caraballa to 400 bucks and I started shorting again because it was just
getting so ridiculous and ended up maybe losing another 50K on it just chopping myself up because it never dropped and liquidity got even worse and then the next day it was trading at like 700 so I was like I have to try this again, the stock's up from 20 bucks to 700, started shorting and I decreased
my position size so I could deal with the liquidity -ness and I ended up losing another 100 points on it, totaling my losses to like 250, 300K and then I tried it one more time, the stock went complete supernova to 2 ,500 per share and I was short at the top of the stock, I had a small position short
for like 2 ,400 and my broker said hey, you can't swim this overnight, it's way too risky and I ended up covering and the spread at that point was like 300, 400 bucks and I ended up losing maybe like another 100K on it so my total losses on it was like 400 ,000 and then the next day a gap down, like 1
,000 points or something and started trading and it slowly faded off and now the stock's at like 20 bucks or something but the liquidity just dried up and made it impossible to trade and it just went way further than I expected but 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 that they proved for it to be a good trader.
Wow, what a story. So why did the broker not allow you to hold it overnight?
Were you in a margin call situation?
No, they were just lending out fake shares, right?
So in my, I'm not gonna name the broker but in my humble opinion, it was naked shorts so they weren't allowing people to hold it overnight because they didn't really have shares, they were just lending shares out of thin air so they don't have the locate to let people hold this overnight.
Oh, wow. So as a result of this experience, did you set a rule for yourself so that in future trades you would have a maximum position size, say percentage as a percentage of total dollar volume?
Yeah, I would say that for now, now I've really learned my lesson where the last year I was aware of a liquid stocks but I've never experienced a scam, go to 2 ,500 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 and the company
has zero revenue, it's a complete scam.
I just never really expected that to ever happen and it was just a good learning experience that I really learned how people actually blew up because before I would hear stories of like, hey, this guy's blowing up on this and I'm like, I mean, like why?
And now like I understand like, wow, like this really could happen.
If I just shorted at 200 bucks and I held 2 ,000 shares, I would be down like 4 million at the top and I would blown up my shorting account.
So it really opened my eyes to what could really happen and now if I'm gonna trade a liquid stocks, like I'll position myself with $100 ,000 in the stock, like if you start pushing like a three, four, $500 ,000 position, that's when it gets really scary because all it takes is 100 % to lose multiple six
figures. And for me, like I can take 30, 50, 70K losses, they still hurt, but that's like the most I'm willing to lose on something that's super extended in the liquid.
And sometimes like they end up working and I can make a few hundred thousand if they start to sell off.
But for me, it's just all about the position size.
I really don't wanna size in more than like $150 ,000 into it.
Uh -huh, yeah, I would encourage all our listeners to go check out the chart on HKD.
It is quite 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, but I've started trading like bigger cap stocks.
Like I've made a couple of 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 because I know those stocks aren't gonna make a 50 % move down against me without me having time to react to cut because it'll prove itself
over the long haul.
Like, hey, this is breaking support levels.
I gotta get out, the market's looking bad, et cetera.
Versus day trading, I will never ever use leverage because how crazy the moves can happen and how unpredictable the moves can happen and that's the only way I'm using leverage.
And I'm not really even using leverage because I have my accounts spread out so it's not like I'm betting like my entire net worth plus some, if that makes sense.
Uh -huh. So 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 2020 into February of 2021 because I kept seeing all these Joe Schmoes making thousands of percent and I'm like, I'm like 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 scams 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, they're smart for a very narrow 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 don't fall in love with the company, 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 hot sectors, electric vehicle, electric vehicles, bitcoins, leads, 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, 500 to 1 ,000 % winners.
And some of them I sold way too early and I could have made like, I was buying some stocks at like 0 .006, 0 .003, 0 .009, 1 cent, 3 cents.
And these stocks were going 10 cents, 20.
The biggest winner in all of OTC, which had a phenomenal liquidity was TSNP.
Now they merged the company and now it's HMBL and it went from 0 .002 to over two bucks.
They also did, it will show that the high is like seven or eight now because once they merged, they also did a reverse split or whatever and the price went higher.
But yeah, one of my friends had bought 50 million shares of it at 0 .001 and yeah, he put about $5 ,000 into it at nothing and at the top, it would have been worth like $10 million or a hundred million dollars.
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 20, 30 million shares a day.
But yeah, that's the possibility if 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. 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 or hype that caused these type of stocks to spike will reverse quickly?
There's a couple of problems with shorting and holding.
Like the number one thing being there's a very expensive short interest.
Like if everybody knows that the scam, everybody's gonna be shorting it and the interest will be 500 to a thousand percent to hold it overnight.
So that just recently happened with the ticker GTII.
It ran from, what was it, like 60 to 80 cents, topped at like nine or 10 cents last month.
And I was shorting it seven, eight, and it ended up cracking all the way down to like two or three, but I just couldn't justify myself holding 20, 30 ,000 shares short and paying like five, seven, $8 ,000 a night in overnight interest.
So 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 paying like 30 or 40 ,000 just to hold it short, which would have ended up paying you money if you covered it at two from like six, you would have made good money.
But for me, the stress and also the uncertainty, hey, what if this isn't right and it starts going back up?
I'm taking a loss plus I'm taking a huge loss in overnight interest.
So I really don't like swinging the penny stocks overnight that are scams.
I just like day trading them when I like capturing the day that they're gonna dump 20 to 50 % and 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.
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Yeah, I'd like to move towards 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?
I would say at the beginning, it was really hard because a thousand bucks here, a thousand bucks a year, 500 bucks there went a long way and it still does.
That's still really good, really good money.
But now I have large enough accounts where I don't really even notice my account go up or down.
At the beginning, I'd be watching it slowly grow, like 200K, 300K, 500K, 700K, whatever, et cetera, and it keeps going up.
But now, if I'm trading and my account has 2 .2 million or 2 .3 million, it doesn't really matter to me as much anymore.
I don't really pay attention to it as much because I've seen so many numbers flicker in my life.
So I guess you just kind of get numb to it.
Do you consider trading to be a sport?
Yeah, I would say it's definitely a sport.
You're competing against everyone else.
And usually, the people that put in more work, they're going to be more profitable and they're going to outtrade you because they're working harder.
So the more work you put in, it's the same with sports.
If you're in the gym shooting free throws every single night, you're gonna be able to make those free throws in the game for someone who just doesn't practice.
Good point. What about personal care?
When you're striving toward your trading goals, upon reflection, did you think you were making major health or relationship sacrifices?
Yeah, in 2019, 2018, when I was living in Michigan, I had no car.
I had 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 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 a fight for every dollar that I was making, plus I had bills to pay, plus I had to pay rent and stuff like that, groceries.
So it was super depressing.
And that was when I was really sad.
And then ended up moving back home.
And I had a car again and I had more friends and that was nice and I started getting more happy.
And then the market turned on to, the market just started going crazy.
And I knew how hard I was working in 2019.
So I used all that energy.
And I feel like this is what kind of separated me between a lot of other people is that they didn't work as hard because they didn't grind as hard and put themselves through depression to learn the market in 2019 and 2018, 2017.
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.
I was so zoned in and so much tunnel vision.
I ended up getting super sick in 2020, 2021.
2020 got COVID traded through it.
And then towards the end of the year was my worst sickness.
I got mono and strep throat at the same time.
And I was so beat up, but the market was so hot.
This was in December of 2020.
And I just continued to trade through it and ended up really just putting myself into a habitual burnout where I had no energy for two or three years.
I was so sluggish. I was so irritable.
But I knew this is what had to be done to get where I wanted to be.
And now this year I've made sure, hey, if the market's not good, I'm not gonna sit here and trade all day.
I'm gonna go... I've been traveling a ton this year.
I get 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, the last couple of years.
And I had to reteach myself how to have fun because when people were having fun, 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 now I love having fun.
And I retaught myself how to have fun and picked up.
I've probably picked up like 30 to 50 hobbies this year, stuff that 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 nice shift.
And this has been one of the better years of my life because now I have the freedom 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 how to get some balance between trading the markets and taking care of yourself.
Have you developed, since processes are important when trading the market, have you explored developing processes for other areas of your life, like diet, exercise?
Yeah, I definitely have.
I would say the main thing is I've really just been focused on schedule driven this year.
So I get up at a certain time, I do certain stuff throughout the day.
I usually make a certain breakfast and I get outside at a certain time.
So 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, et cetera.
And I think that's definitely have learned that type of discipline through trading.
But when I go on vacation, I don't really follow a process, I just do what I can to experience most that I can.
What would you say to your fellow trader regarding mindset and personal care?
Any tips? 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 two top tips are to get outside every day 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 really can develop nasty knots that don't go away and significantly decrease your life and happiness.
Mm -hmm, 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?
I turned about, I had 10 ,000 but then I kept working my valet job and I ended up starting and my mom also gave me my mutual fund too supporting me and I ended up starting with like 20 to 30K kind of in between that range.
And I've turned that now into almost 11 million in profits.
What, yeah, after taxes I'm clear, I'm obviously not, I don't have 11 million.
But that is how much I've made my career.
Yeah. Nice, I mean, did you modify your lifestyle over that time period or?
Meaning like what have I done for myself?
Yeah, like, I mean, do some people imagine, well, as soon as I get my first million, I'm gonna buy this or buy that or take a nice long vacation to some fancy place.
Did you modify your lifestyle much?
Well, when I hit my million dollar market, it was in November of 2020 and I couldn't enjoy myself because the market was so crazy that I had to stay focused.
And the next month I ended up making 800 ,000 almost doubling what I had already made.
And I was just so focused.
And then the next month I made like a million and a half and the next month like 2 .5 or something.
And during that stretch, 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.
And at one point, 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.
At one point, I had like 70 to 100 positions on overnight every single night.
And I couldn't even begin to think like, hey, I need to buy this or buy that.
But it was only after 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 a hundred grand compared to like my other few months.
And then I started saying like, hey, what can I do now with this cash?
So I ended up, one of the first things that I did was I withdrew 50 ,000 or a hundred thousand from the bank.
And I gave my parents 50 ,000 each on my 23rd birthday, 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 the next month after that, I bought a car.
Nothing crazy, I got a Nissan 370Z.
Fun little summer car.
And after that, I've bought a couple watches.
Just, I like them because they hold value and also take some cash out of your account and giving you some physical value.
And other than that, that was really it.
I bought my girlfriend some nice presents throughout the years.
Really, the only other thing is I spent a lot on travel and experiencing stuff through this year and late last year.
I've been to Italy, Greece.
I have a trip coming up soon.
I'm going to Norway, Sweden, and Denmark for a food tour.
Gonna be eating at the top five, or five out of the 12 best restaurants in the world with also the, I am eating at the top -rate restaurant in the world.
And that's an experience that I'm really excited about.
Other than that, yeah, just taking, learning photography and stuff like that.
Great, yeah, that sounds like a fun adventure you're gonna go on.
Yeah. Yeah, that video that I saw of you going to the bank on your 23rd birthday, that was really impressive.
I mean, withdrawing all that money and cash and then giving it to your mom and dad is thanks for being good loving parents to you.
I can't forget the expressions on your parents' faces.
It was very moving.
Thank you, man. Yeah, so in closing, what would you say to traders who are losing money?
First off, this year has been very difficult and I would say that the last couple of years, it was relatively easy to make money as long as you had some type of process.
It didn't even have to be that disciplined because everything was just, there was so much volatility and volume.
And now it's very difficult and this type of year is the best to learn and because it's really gonna teach you your discipline and it's gonna 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, you'll be able to make small consistent money and just know that eventually a hot wave will come back around and that's when you scale up and that's really gonna 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 gonna 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 worked every single day for months and years without really turning a profit, but all it takes is one month really to grow your account 100, 200 % and then from there, if you keep compounding it, you'll be surprised by how exponential it could potentially go if you have the right process and you have the right
market lineup. Yeah, great advice, Jack.
It is 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 to speak with you, Ian.
Yeah, how can our listeners get in touch with you?
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.
Other than that, some of my trades are posted on Kinfo and Profit .ly, a couple of third -party verification softwares that I use and that's about it.
Great, thanks for sharing, Jack.
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