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Trading Lessons

How to Avoid a Widow Maker

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Written by Timothy Sykes
Updated 10/2/2023 7 min read

Even though I make fun of short sellers…they aren’t always wrong.

The next shoe can drop on these junk companies in seconds.

Yet, when stocks like Baudax Bio Inc. (NASDAQ: BXRX) take an unexpected nosedive, many traders find their hard-earned gains wiped out in the blink of an eye.

Today, I want to show you how I cut the risk of encountering a Widow Maker event to the absolute bare minimum.

Follow these suggestions, and you’ll find yourself with fewer and smaller account drawdowns.

Why I Like the Mornings

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Anyone who’s attended one of my LIVE Strategy Sessions knows my favorite setups are Morning Panic Dip Buys.

I find these to be the most consistent plays for my style of trading an penny stocks.

It’s far more rare that I’ll take a trade in the late afternoon.

Here’s why.

First thing in the morning, I EXPECT volatility because that’s when it’s most likely to happen.

I’m not looking to buy a consolidation for a breakout higher.

No, I want to pick off a stock that’s dropped substantially after a monster run.

I’m talking about buying a dip of 30%-50% on a stock that’s up 50%-300% in the premarket.

Here’s a recent example from MSP Recovery Inc. (NASDAQ: LIFW):

The stock was up over 50% in the premarket, running hard into the open.

That dip might not seem like much. But it was almost a 10% pullback.

What’s important is you see all the big moves up and down first thing.

That’s where I want to play.

I don’t need to worry about whether a big move is coming because that’s what I want to happen.

I just want it to happen in the direction I want. And if it doesn’t, I cut my losses quickly.

Let’s compare that to the chart of BXRX from Thursday afternoon:

Look at this narrow trading range of less than 10% on low volume that lasted hours.

It’s almost daring you to take a position just to whip you out of the trade.

In fact, it popped just enough to suck folks in right before crashing out on heavy volume in less than a minute.

That’s the danger you face when coming out of tight consolidations with low volume.

It’s why I want stocks to prove themselves first – show me what you can do and give me something to work with.

I’m not opposed to taking afternoon trades.

But I want to see price action.

Here’s an example from Near Intelligence Inc. (NASDAQ: NIR):

While the ranges are certainly tighter, this wasn’t a stock sitting in one spot all day. It had been trending lower, making some share drops along the way.

I dip bought late in the day, where I saw support and expected a small bounce.

What should be obvious is that this stock was so far off its highs that it was close to the lows.

So, even if I got caught in a Widow Maker, there was strong support for how far it might drop.

Prepare for the Worst

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I want to make one point abundantly clear – you cannot avoid all Widow Makers.

Trade long enough, and you’ll eventually get caught in one. That’s just the way things work.

Everything I’ve said up to this point is about reducing their risk.

But I’m trading penny stocks. News can drop at any time. Even a large order can collapse price.

That’s why I don’t like to hang out in trades that aren’t doing what I want when I want them.

The longer I stick with a position, the greater the risk of a big swing against me.

That’s why I often cut trades quickly, even for tiny profits, because I want to keep those Widow Makers to as few times as possible.

And I do that pretty well.

In any given year, out of hundreds of trades, I might get caught in a dozen at worst.

When they happen, I suck it up, cut the trade, and accept the loss.

🚀 Ready to Conquer Widow Makers in the Market? 🚀

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Navigating penny stocks can be exhilarating, yet treacherous. One bad move, and a sudden market shift can decimate your portfolio. Take stocks like Baudax Bio Inc., for example – a seemingly normal trade day suddenly turns into an unexpected freefall. This market is constantly shifting, and if you’re relying on old strategies, you’re dancing on a tightrope.

But, what if you had the tools to side-step these so-called “Widow Makers”? What if you could confidently traverse the penny stock landscape, armed with strategies that minimize risks and maximize gains?

🔥 I’ve dedicated years crafting and refining my strategies, and now, I want to arm YOU with them.

🔥 Discover why Morning Panic Dip Buys are my go-to, and why I avoid late afternoon trades like the plague.

🔥 Gain insights into understanding the market’s cues, ensuring you’re always a step ahead.


🚀 Join me in our exclusive live training sessions.

🚀 Unpack the strategies that have kept me safe from the perilous Widow Maker events.

🚀 Experience real-time market analysis, and understand the nuances that most traders miss.

🚀 Don’t merely survive in this tumultuous market, THRIVE in it.

Are you ready to transform from a regular trader to a market maestro? Prepared to face and conquer the unpredictable whims of penny stocks?

🚀 Your Guide to Mastering the Penny Stock Game is 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”