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Penny Stock Basics

3 Penny Stock Trends I See Right Now

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Written by Timothy Sykes
Updated 1/9/2023 6 min read

January started off strong…

…but not exactly how I anticipated.

Supernovas are popping off left and right…

…stocks like Phunware Inc. (NASDAQ: PHUN), AMTD Digital Inc. (NYSE: HKD)

…proving the POWER of the ‘January Effect’ that the Winter Glitch exploits.

However, three key trends are forcing me to make some adjustments:

  • Premarket pumps that dump at the open
  • Excessive trading halts
  • Violent moves

So far, my new plan is working perfectly.

And rather than keep it to myself, I wanted to pass along my Winter Glitch blueprint.

In this newsletter, I’ll explain the changes I’m making and why.

Then, you can decide whether to incorporate them into your trading plans.

Take Profits Quickly

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I’m a skittish trader by nature.

If a setup isn’t working, I don’t wait around long.

That goes double right now.

Take a look at the one-minute chart of PHUN:

This stock followed the 7-Step Penny Stock Framework to the letter.

It just happened in minutes rather than over days.

With moves that fast, traders need to act quickly.

Let’s say I wanted to play the panic dip buy.

I would have literally seconds to minutes to get in and out of this trade.

For most traders, that’s a lot to ask.

So, don’t be ashamed to pass on stocks that move this fast.

If you do trade them, keep your size small enough that a miss isn’t going to cost you big.

Learn to Manage Trade Halts

I want to show you a chart of Moolec Science SA (NASDAQ: MLEC) from Friday.

Each arrow points to a volatility halt.

This stock had 16 in one day…all after midday!

I’ve seen more trading halts recently as stocks open and either fall apart or zip higher into a halt.

Halts are dangerous if you don’t understand how they work.

Holding a position, long or short, for five minutes or more is nerve-wracking.

Even a penny stock like MLEC that largely moved higher had plenty of trading halts to the downside.

At each instance, you have to decide whether to hold or cut and run.

These things can get nasty and chop traders right out of their positions.

HKD provides a different example where things looked like they might turn around from a lousy premarket but instead flopped.

In my mind, a trading halt that goes in your favor is a spot to take some profits.

You don’t have to take everything off the table.

However, locking in half or more will give you some comfort to ride the remainder to more money or a stop back at breakeven.

Avoid Premarket Trading

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I rarely, if ever, trade the premarket.

It’s the most heavily manipulated time of day when chat groups get together to pump up a stock.

Folks who subscribe to our Breaking News Chat on our Stocks To Trade platform can watch this happen in real-time.

Our analysts call out pumps they see in popular trading rooms that often have a visible reaction on a stock.

I find more consistency and profitability sticking to my 7-Step Penny Stock Framework and locating ideal setups that fit.

Yeah, sometimes that means I pass on trades that end up huge winners.

But in the long-run, it’s helped me maintain a healthy win rate over 75% and a great track record.

Most newer traders get sucked in by the headlines and price action, chasing fliers being pumped by chat rooms.

You’ll do a lot better and go much further ignoring the hype and staying methodical and mechanical.

Bonus Observation

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Silvergate Capital Corp. (NYSE: SI) had all the hallmarks of a great overnight long trade.

And guess what happened…

Shares plunged on news the company wasn’t as solid as it seemed.

There are a lot of stocks catching bids right now.

Heck, even Bed Bath and Beyond (NYSE: BBBY) jumped a little after it plunged on bankruptcy news.

Don’t be fooled.

All of these penny stocks will eventually crash.

Holding overnight is especially dangerous right now.

If you want to swing trade, then use the lessons from my Weekend Trader.

Lock in profits early, keep your size small, and act quickly.

There is zero reason to take on excess risk with so many opportunities.

Play quality setups and avoid marginal ones.

It may seem boring, but I’d rather be bored and make money then emotional and broke.


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”