—I created ParadigmTrades.com in order to document a certain approach to day-trading in hopes that other traders will get involved, share their own strategies, and thereby create a valuable information exchange for a unique group of traders working within a unique sector of the stock market. Everything here is free. No subscriptions, no pay-per-view videos, no “get rich quick” schemes. Hopefully you will comment, share, and discuss the strategies shown here, and also add your own ideas and processes so that we may learn from each other.
—My trading focuses mostly on bio-techs, baby-pharmas, and blatant scams that are commonly found in this unique niche. Where is the opportunity? The opportunity is in the overall design of these companies themselves, and their desire and ability to use gullible “investors” to fundraise their further developments.
—The ability to capitalize and make money within this sector mainly lies in the ability to spot what is called a “pump”. There are many forms, but the most common pumps are done by small, fundamentally unsound, and fledgling companies that are usually pre-revenue or pre-income. These companies are desperate for funds and will pay promoters, banks, and analysts to convince unsuspecting investors to buy their stock via upgrades, positive press, promotional campaigns, boiler rooms, and more. This in turn causes the stock’s price to rise well beyond the value of the underlying company, and this is the point that the company will execute what are called secondary offerings. A secondary offering is when shares of the underlying company are either dumped onto the open market at the bid (At-The-Money offering), or are offered at a discount to select investors. These offerings make a fortune for the fledgling company, their officers, and the investment banks, but cause dilution, crush the stock price, and almost always leave the retail investor “holding the bag”.
—Although there are other strategies featured here (Short Squeeze Anticipation Buys / Premarket Breakdown Shorts), the ability to spot this manipulation and capitalize on it via short selling (betting that the stock price will decrease) is the main concept, and it is a complete paradigm shift from normal investing mentalities used in buy and hold value investing. Although buy and hold is a valuable approach for those with considerable sums of money and time to wait, the approaches shown here are more suitable for those interested in trading with smaller sums of money and shorter time frames.