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Is This The Best Strategy To Trade Right Now?

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Written by Timothy Sykes
Updated 8/11/2023 6 min read

What I’m about to share with you might blow your mind…

It’s all about a strategy that I’ve been trading recently that’s brought me A TON of success.

It’s beyond contrarian…

Once I tell you about it, you’ll be shocked at how it works.

In fact, I used it earlier this week to make a fast 16.7% return in just a few minutes in the ticker symbol DRUG.

The Back Story

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When I first hit the scene I was known as a short seller.

I specialized in finding pump and dump stocks and shorting them.

My thinking was, it’s hard to find winning stocks…it’s a lot easier to find the worst of the worst and short them.

And for a long time that strategy worked.

I shared the strategy with a lot of my students, some of them went on to have great success with it.

It was beautiful because it was so predictable.

You can always bet that the worst companies will act in the worst ways.

But around 7-10 years ago…the landscape changed.

The strategy became too crowded…and instead of these predictable garbage stocks dumping…they actually started squeezing.

The risk vs. reward started to shift…and instead of being primarily a short seller I started focusing on taking longs.

But here’s where it gets funky…

Short Sellers Have Become The New Promoters

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Even though I don’t short sell anymore…the strategy remains very popular.

The fundamentals haven’t changed.

Stocks that get promoted eventually dump.

However, the timing has become difficult and the moves have gotten bigger.

Yes, most of these stocks will sell off…but we don’t know when and how far they’ll go up before they crash.

That means you need very deep pockets and incredible risk management skills—two things newbie traders don’t have.

And since my main focus is on helping my students become better traders, I stay away from short selling.

Now that the risk vs. reward has shifted…you have a number of traders who try to squeeze short sellers…traders with bigger pockets than you and I.

How I’m Playing This Weird Market Trend

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This may sound funny…but I’m looking at buying dips in failed one-day runners.

Why?

Because short sellers are piling into these garbage stocks once they see weakness…

You see, a lot of these short sellers are over aggressive and lack discipline.

All they think about is that the stock they are shorting is garbage…and while that might be true…trading is all about managing risk.

If you short a stock at $3 and it goes to $60 and then later it goes back down to $1…guess what? You are not making money on that short.

I’m not joking…

Look at what happened to VTGN.

Source: Breaking News Chat

Stock went from $2.50 to $60 in just a few hours…

Yesterday it was trading in the $7s.

Like I said, you need deep pockets and incredible risk management skills if you want any chance to survive being a short seller.

For most short sellers, they are one or two trades away from blowing up their account.

Back in the day I was trying to take advantage of sloppy promoters…today I’m looking to take advantage of undisciplined short sellers.

And that’s what this game is all about…taking what the market gives you.

My Trade In DRUG

Source: Etrade

I traded this stock on August 8th, which was Tuesday.

I got a partial fill on a deep dip buy…

The stock was up A LOT in the pre-market…

It had what I thought was solid news and was heavily shorted.

I jumped in around $4.95…and before you knew it…I was out at $5.78.

If you look at the chart above it got into the $7s…

But I’m not looking to overstay my welcome in these types of plays.

And if you look at the chart following, you can see that it eventually crashed.

To sum it up, shorting has gotten very overcrowded. And because of that, it’s causing shorts to get over aggressive. I’m trying to find stocks where I think the shorts are lurking and trying to take advantage of their lack of discipline.

And thus far, it has been working.

I’m not advocating that these stocks I’m trading are long term buys, but I’m not an investor, I’m a trader who is looking for quick profits on setups that offer good risk vs. reward.

 

Not Just Theories, Real Success: 

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If you’re genuinely passionate about improving your situation through trading and understand it will take discipline and patience then I’ve got something for you.

I’ve guided several of my students to the next level, +30 have become millionaires.

Ready to transform your trading journey?

SIGN UP TODAY FOR ONE OF OUR FREE LIVE TRAINING CLASSES. 

You owe it to yourself to see what you’re capable of.

I can’t wait to see you there. 

 


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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”