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Trading Tips-Tim Sykes Penny Stock

Adapt to Changing Markets or Die

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Written by Timothy Sykes
Updated 6/20/2022 5 min read

I hear from a lot of traders on social media who are struggling in this market, not being able to position size or manage risk correctly.

As I always say, some markets are for learning and some are for earning.

This is a learning market.

The thing is, that doesn’t mean you just sit back and watch the market pass you by entirely.

But there’s a way to do this methodically that balances risk and reward.

And it doesn’t mean completely reinventing the wheel.

In fact, I want to show you a few simple tweaks that any trader can use to remain an active player in the market while maximizing their potential gains.

Identify the Broader Trends

It doesn’t matter whether I’m trading penny stocks or large caps. I always want to know the broader trend.

Take a look at Redbox Entertainment Inc. (NASDAQ: RDBX) for example.

In the last few weeks, this stock has seen one heck of a run. I drew a few arrows to highlight the general movement and trends.

Initially, the stock ran higher on heavy volume, traded sideways for a few days, then made another push higher. Finally, it made one last thrust before topping out.

The yellow horizontal lines identify the breakout areas.

Once any stock or market drops below those points and stays below, it’s changed the trend.

That puts the stock on a path to reach for the next important level.

Right now, we can see that RDBX is trying to make a move back higher. Yet, it can’t get enough interest to make its way back to the last breakdown area.

For now, that puts this stock in a somewhat bearish trend, especially with volume on the decline.

This same analysis applies to any stock and any chart.

So what’s different now from say a year ago?

Back in 2021, many of the meme and penny stocks would get bid up for days, if not weeks.

Now, I expect them to fail within days.

That’s why I may only take a couple of trades in a stock before I part ways with it.

Yes, that does require a lot more scanning. But that’s where the StocksToTrade platform is an immense help, especially the Breaking News Team.

They keep me up to date with the latest movers every morning.

But there’s another benefit to trading different stocks. It keeps me attuned to which stocks are moving — and which sectors.

That’s how I find additional trades like oil and gas penny stocks.

Keep Your Trades Small

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One of the most common mistakes traders make is using the same position size in every market.

Right now, markets are extremely volatile and carry far more downside risk than in the past.

Even successful traders lower their trade size in this kind of environment.

As I tell my students, I want to cut losses quickly.

That’s much harder to do when I take an oversized position.

Don’t get me wrong, there’s a time and place for upping the ante.

But it’s not going long in a bear market.

Keeping a trading journal can help you figure out the best size to use by showing you the maximum drawdowns you’ve taken over a span of weeks.

If you aren’t sure what the correct size is, start small and work your way up. You can also use a demo or simulated account to collect the information you need before moving on to a real money account.

Look for Hot Sectors & Themes

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Every market is governed by the latest trends.

Even when Covid sent nearly every stock lower in early 2020, stay-at-home plays like Zoom Video Communications Inc. (NASDAQ: ZM) soared higher.

Right now, oil and gas stocks are the hot ticket. But I have a feeling that’s going to change pretty soon.

The one area that tends to work for penny stock trading in any environment is biotech firms. They rely so heavily on news to boost them up, and there are so many companies, that there are usually a couple that start moving pre-market on any given day.

I’m not a huge fan of trading premarket. But these types of stocks can make excellent day trades if you know what to look for.

The Bottom Line

No matter what, I want to stay in control.

When markets aren’t conducive to my style of trading, I cut my size and focus on making good decisions and execution.

Don’t worry about what other people are doing. The only thing that matters is how you trade.

Now, finding the style that fits you can be tough. I bounced around for years until I came across my Supernova pattern.

And then everything changed.

Learn about this incredible pattern by clicking here.


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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

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* 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”