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Penny Stock Basics

Adapt to This or Be Left Behind

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Written by Timothy Sykes
Updated 1/4/2023 9 min read

They say that good things come to those who wait and to those who adapt to this simple trick I’ll show you below.

But have you ever waited for the perfect setup … then waited and waited?

Patience is important as a trader. But if you want to make the most of the opportunities that come your way, you’ve got to keep an open mind. 

The market won’t bend to your will. It will rarely (if ever) send you the exact play you’re looking for. Instead, you’ve got to listen to the market, keep an eye on things, and adjust your plans based on what you see.

Recently, I’m noticing that some of my students are struggling with this … and I want to talk about why it’s SO important to keep an open mind as a trader. 

Are You Missing Out?

As a teacher, one of my biggest goals is to help my students learn to think for themselves. This is super important, because to be able to adapt to the market, you have to be self-sufficient.

But sometimes, traders get into a rut. They get too stuck in their methods and aren’t open to the natural evolution of the market.

For instance, say that you’re looking at first green day setups. If you’re too caught up in looking for specifics, like stocks that fall into a specific price range, you could be missing all sorts of opportunities.

Listen to the Market

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Trading isn’t like fast food. You can’t customize your burger or add fries. You’ve got to be open to the variations that the market is presenting.

To be clear: I am NOT saying you should stop looking for perfect setups.

Profit.ly user asfricksrs responded to a recent Mark Croock webinar with key traits of successful trading:

“humble, patient, discipline, protect, protect, protect, wait for the right setups, ty Mark for reminding me I am not missing any plays.”

However, you need to be open to the fact that like in life, trading opportunities are sometimes slightly different from how you might think they’ll be.

So yes: look for your ideal setup.

But at the same time, don’t ignore what the market is telling you.

The Market Evolves … Can You Adapt?

You can’t make the market do what you want. You also can’t count on a setup to continue working the same way forever.

For example: lately, first green day stocks have been very hot. But this trend has been shape-shifting.

Lately, there hasn’t been much action with higher-priced ($2, $3, $4, $5) first green day stocks.

However, there HAS been plenty of action with lower-priced stocks. All the best recent first green day stocks lately for the past few weeks have all been very low priced — under $1.00 or even under 50 cents per share.

If you’ve made the decision that you’re the type of trader who doesn’t trade stocks under $1 per share, this means that you’re missing out on some killer opportunities.

Or as Profit.ly user amili2046 says:

“Analyze, refine, adapt! Analyze, refine, adapt! Analyze, refine, adapt! Analyze, refine, adapt! Analyze, refine, adapt!”

Is Your Broker to Blame?

If you have the wrong broker, even if they’re commission-free, you could be missing out on opportunities.

Many brokers don’t let you trade low-priced stocks … and that means missed opportunities! Even if your broker is commission-free, if they don’t offer you access to the hottest plays right now, then you’re missing out.

I’ve talked about it in the past: E-trade and Interactive Brokers are some of my personal favorites. Read this post I wrote about what I think are the top online brokerages for beginners and day traders.

I usually use E-trade for stocks under $1 per share, and Interactive Brokers for higher-priced ones, or stocks where I’m buying fewer shares.

These are my favorites because they have the most availability with low-priced stocks.

Choose your broker with care, because the wrong broker could be cutting into your trading opportunities. 

Get In Tune With the Market

To stay relevant as a trader, you have to get in tune with the market and in tune with yourself.

The more patterns you become familiar with, the more patterns you learn, the more you’ll be able to recognize them in the future. 

If you’re looking for a pattern that you want to see versus what’s actually there, you’re setting yourself up for failure.

The market will tell you what’s hot and what’s not if you observe it. Are you listening?

Here are some tips for getting and staying in tune:

Follow the Rules

It’s understandable if you get pissed off after a big loss. But can you learn from it? If not, then you’re setting yourself up for even more losses in the future.

I don’t know everything. I make mistakes as a trader. But I’ve also learned a lot of great lessons in my 20+ years of trading. And I know that if you break the rules over and over … you’ll probably lose more than you need to.

My Trading Challenge focuses on helping you learn the key mechanics and rules of trading so that you can be nimble and think for yourself in the ever-changing market. I urge my students to LEARN and PRACTICE, like this:

Are you up to the Challenge?

Look at the Big Picture

You can’t just look at the short-term dollar gains and losses — especially as a newbie.

Honestly, your focus shouldn’t be on money, but on learning. 

You should be trading with a small account at first so that losses are negligible. Yes, gains will be negligible too, at first. But you can scale up, and over time, that’s the safest way to grow your account.

Stay Focused, But Be Flexible

Focus on what you’re good at … and what the market is trying to tell you. It’s a balance.

Do not just focus on what you’re good at if the market is telling you something different.

As Profit.ly user kylecw2 wrote,

“as you get better understanding the setups and patterns that work best for you, you’ll learn to know which tickers are going to bring you the best odds and profits. I know what setups bring me the most money therefore they are the priority. If you don’t know this about your trading yet I suggest you look to see where your biggest winners are from and start tracking that setup and see if its repeatable.”

Have a Repertoire

All told, I might have less than a dozen go-to patterns and key setups that I rotate through when the markets are working.

For example…

Right now the pattern that’s working the best is first green days on low-priced stocks. Sometimes it’s overnight but sometimes not. Sometimes it involves holding ‘til the last hour of the first green day and selling into the close.

Parting Tips

To sum it up? If you want to stay relevant as a trader, you’ve got to keep an open mind. This means you have to:

  • Adapt to the market.
  • NOT be narrow-minded.
  • Test and try to find what works for you.
  • Look at what’s working in the market.

No, it’s not an exact science. You’ll have to experiment a lot and keep learning from your successes and failures. That’s the process of trading!

Will you use these tips to help you keep an open mind as a trader? Got any suggestions on other ways to stay open-minded? Leave a comment and share your thoughts. I love hearing from my readers.

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Author card Timothy Sykes picture

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”