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Millionaire Mentor Update: When the Best Trade Is No Trade

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Written by Timothy Sykes
Updated 1/24/2023 11 min read

In this edition, let’s talk about when the best trade is no trade. (This is super important! It could potentially save you thousands of dollars and a whole lot of grief.)

No matter where I am, I’m grateful for the opportunities life gives me.

As always, I have to acknowledge the freedom trading and teaching brings me. It all started 20 years ago when I saw patterns in the way low-priced stocks move. I see those same patterns today. If you’re ready to learn the patterns and the nuances of trading, apply for the Trading Challenge today.

Relaxing in Europe

Recently I’ve spent quite a bit of time in Positano, Italy. I’ve also been in Mont Saint-Michel, France where I filmed some video lessons. I won’t give all the details but I’ll give you a hint: it’s about traders who just follow alerts. That never makes for successful students or traders. (Spoiler Alert: There might be sheep involved.)

I love trading from Europe as long as I have good Wi-Fi — it’s a great time zone for trading. The U.S. stock market opens at 3:30 or 4:30 p.m. depending on my exact location. It’s also a great place to have fun and relax. I’ve been staying up late and sleeping in since I don’t need to get up early.

Trading Lesson of the Week

Over the past month the stock market has been on a roller coaster ride. As I write, the markets have been getting crushed the past few days. The Dow Jones Industrial Average dropped 800 points on August 14 — the biggest one-day drop this year.

Sometimes the Best Trade Is No Trade

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With the stock market going through such wild swings, I’m reminding students to stay safe. It’s better to sit on the sidelines and watch than blow up your account. That brings up one of the most basic trading lessons you need to learn…

You don’t have to trade. Sometimes the best trade is no trade.

Trading Strategy: Earnings Winners

I have been doing some trades. Mostly dip buying earnings winners. That strategy has been working well for me recently.

Stocks like SigmaTron International, Inc (NASDAQ: SGMA) and Smith Micro Software, Inc. (NASDAQ: SMSI) are examples of earnings winners, but I didn’t trade these. Another recent earnings winner — which I did trade for a small gain — is Quantum Corporation (OTCPK: QMCO).

So, I’ve been focusing on earnings winners but at the same time trading very small positions. I’m trading conservatively because the overall market is scary. Remember, three out of four stocks follow the market.

We’ve seen that the markets can drop big on one tweet or one news article. For example, news of Argentina’s stock market collapse, the Hong Kong protests, or the China deal collapsing. There are a lot of big risks right now.

In my opinion, in August — which is typically the slowest month of the year — with all these big, scary things happening…

… sometimes the best trade is no trade. Say it: Sometimes the best trade is no trade.

My Biggest Recent Trading Win: (OTCPK: PCTL)

Paradigm Convergence Technologies Corp Ltd (PCTL) is a tech licensing company. They specialize in environmentally safe decontamination systems serving a variety of industries. The long-term chart is terrible, and PCTL is a true penny stock.

I dip bought PCTL on August 15. It spiked early in the day, and then there was an afternoon selloff. I had a lot of questions in chat about why I bought this one. Take a look at the five-day chart below. It tells part of the story. I’ve added a yellow support line to make it clear. Remember, resistance becomes support.

Here’s the five-day PCTL chart with support line:

PCTL 5-day chart: 1-minute candlestick — chart courtesy of StocksToTrade.com
PCTL 5-day chart: 1-minute candlestick — chart courtesy of StocksToTrade.com

As you can see, I based my entry on support from the previous few days. Resistance became support. Plus, the open price on August 15 was right near the support level.

Normally I don’t trade afternoon panics, but this one had several things going in my favor. You can’t see it here, but watching the level 2 data showed the dip wasn’t caused by a wall of sellers. It was one or two big sell orders. At almost the same time, the S&P 500 was falling. My guess is, the sellers were taking profits from the morning spike.

Now take a look at the PCTL two-day chart:

PCTL 2-day chart: 1-minute candlestick — chart courtesy of StocksToTrade.com
PCTL 2-day chart: 1-minute candlestick — chart courtesy of StocksToTrade.com

My goal on this trade was to make 7%–15% on the bounce. It was speculative, so I took a small dollar position. I sold into strength, right on my target for a 15.22% gain. It was a solid gain that wiped out a few small losses earlier in the day.

This one is a great reminder to keep losses small and be picky. One good trade can wipe out a bunch of little losses. But big gains don’t always wipe out big losses.

Now, on to some…

Trading Questions from Students

This week I’ll answer two general questions. If you’re a newbie, pay attention. If you’ve been around for a while but you’re struggling, pay attention. If you’re not already profitable, pay attention.

Sometimes it pays to get back to basics…

“Tim, I’m new. What actions would your dream student take before taking any trade?”

They’d go through all seven indicators on my Trader Checklist guide. They’d make a plan and study it. If you’re not familiar with the Trader Checklist guide, I urge you to watch it. Take notes. It’s nearly 12 hours of material explaining the Sykes Sliding Scale.

Did I mention it’s FREE? Seriously. It’s 12 hours of content that can help you decide whether a trade has potential, what to look for, and how I think…

Sykes Sliding Scale

What is the Sykes Sliding Scale? It’s a way to grade a trade before you risk your money. If you use it, you’ll be using seven indicators. Not one … not six. Seven. You’ll learn to score each indicator to see if it’s a trade you want to take.

Want to know something? If you go through the entire Trader Checklist guide, you’ll be one of the few. I encourage all my students to go through it. I link to it every day in my watchlist. Sadly, many students ignore me.

Then, they ask questions based on one indicator without considering the other six. It frustrates the hell out of me sometimes. No question is a bad question — but you can do yourself a big favor by watching the guide.

That way when you ask a question about a pattern or setup, you can include more and better information. Then you’ll get an idea of how I think — my process.

Also, they’d recognize that one of those indicators is their own personal schedule.

Personal Schedule Is An Important Trading Indicator

Part of the reason I share my life is because so many different things can influence your trading. I share my travels, when I have good or bad Wi-Fi, and even when I feel like crap. Like when I hurt my back getting off the plane in Hawaii back in June. You have to be aware of these things because it can influence your trading.

As for more general advice:

  • Study the past to prepare for the future.
  • Study all the patterns I teach and learn to recognize them.
  • Start with a small account and small position sizes. Don’t be a gunslinger.

Going back to the theme of sometimes the best trade is no trade…

Why not practice using the Sykes Sliding Scale without trading? Or better yet, get StocksToTrade and paper trade. But use the indicators you learn going through Trader Checklist before every trade. After a while, it can become second nature.

The key is to use the indicators before you do anything else. Then — pay attention — go back after the fact and review the indicators. See whether you were right or wrong. Re-tabulate the scores.

The next question is interesting because it could apply to more than just trading. For trading longevity, the answer is essential…

“What does the mindset of a successful trader mean to you?”

A successful trader has a testing mindset. What do I mean by that?

Testing different indicators. Testing different strategies to find what works best for you. Find what works best for your strengths and weaknesses. What works best for you in a changing market?

Success as a trader is kinda like hitting a moving target. You find what you’re good at — whether you’re dip buying breakouts on earnings winners — or some other strategy. Then understand the strategy might work for you but it doesn’t work for the current market.

So ideally, in a perfect world, you’d have two to four strategies that work best for you and your personality. But to find those strategies you have to try out a dozen or more.

I try to narrow it down to what works best for me. That’s how I trade and what I teach.

The great news is that Trading Challenge students now get access to Huddie, Mark Croock, Michael Goode, Tim Lento, and Tim Grittani. It’s good to take a little something from each trader. Then figure out what you can utilize for your process.

Then you wait until your strategy works. It’s about what’s working and what’s not working. You’re trying to get in tune with yourself and in tune with the market.

It’s never gonna be a perfect scenario. But you can get pretty close. And when you get close…

… when you start feeling it…

… and when there’s a hot sector, you recognize the pattern, and the pattern is working in the present market …

… trading can feel easier.

When it doesn’t click, trading can be very hard. That’s why I say you should spend so much time studying the past. As much as possible. I believe it can help you get in tune with yourself and the market.

Millionaire Mentor Market Wrap

That’s another update in the books. I love writing these updates and sincerely hope they give you inspiration and ideas. Remember, the stock market is a battlefield. Stay safe, study hard, and make your dream life a reality.

Are you a trader? At what point do you decide the best trade is no trade? New to trading? Comment below with “Sometimes the best trade is no trade.” I love to hear from all my readers so comment below now.

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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”