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Trading Lessons

How to Capitalize on Squeezes and Protect Yourself

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Written by Timothy Sykes
Updated 6/16/2023 5 min read

Far too many folks succumb to scams and market manipulations that seduce them into stocks at the peaks and get them to sell at the bottoms.

Now, I know the squeezes we’re seeing make this extraordinarily tough. All you want to do is buy every breakout, getting mad when the latest one passes you by…am I right?

What I offer my students is the framework and strategies to become great traders in their own right.

Today’s newsletter won’t make you a millionaire trader overnight.

But the lessons I’m about to offer can get you one step closer.

Now, I’m not naive enough to think that my methods are the only ones that work.

That’s why the latest addition to our trading family is a HUGE get.

Pretty soon, you’ll have a chance to learn about BEN STURGILL, an incredible trading coach and one of the nicest guys you’ll ever meet.

Ben brings deep trading insights and experience, and he does it in a way that’s easy to understand.

And during his world premier webinar Thursday, June 22nd, at 8 pm EST, Ben’s going to share the incredible edge he uses in his trading.

Click here to reserve your spot

But if there’s one thing Ben and I have in common, it’s this…

Every successful trader balances risk and reward in EVERY situation with any strategy.

It’s the glue that holds your account together when big losses strike.

And with the squeezes in today’s market, it’s more important than ever to have solid risk management.

That all starts with this one key element…

What’s the Context

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Imagine taking a cross-country journey from New York to California.

No one in their right mind would set out on a multi-day road trip without looking at the weather, road conditions, construction, etc.

I want to know not just what’s happening immediately around my car, but what lies ahead.

Markets are the same way.

Some markets are for learning and some markets are for earning.

While every setup is important, I never lose sight of what’s going on around me. And that’s not just about what’s happening that day but over the last week and month.

I consider the themes amongst penny stocks, looking at what’s hot and what’s not.

To give you an idea, here are some questions I ask myself:

  • Are OTC stocks working or just NASDAQ/AMEX stocks?
  • Do I see any themes amongst the biggest spikers like AI or biotechs?
  • Are promoters active?
  • Is there a possibility of the broader market crashing soon?

All of these go through my mind. These questions give me the context around the stock.

Then, I look into how the stocks have traded including the success of my strategies.

Using my 7-step penny stock framework to determine where each stock is in its lifecycle, and then ask myself:

Markets aren’t some static thing. They’re dynamic, changing, and cycling all the time.

If I  want to succeed, I have to adapt.

Here’s how that works with today’s squeezing stocks.

Create The Desired Ratio

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Every trade is a balance of potential profits and losses.

I like to keep it simple and try for 5%-10% on most of my trades.

Knowing this forces me to do two things:

  1. Exit trades quickly when they aren’t working
  2. Get the best entry possible and set a stop very close by

I can turn a profit risking a 5%-10% loss to make a 5%-10% gain so long as I win more than 50% of my trades.

However, that’s tough for most traders.

That’s why I will often start with a better ratio where I’m risking 3%-5% to make 5%-10% in overextended markets and those I’m unsure of.

This forces me to wait for the best setups and entries.

And that’s the key here.

There are so many short squeezes happening, I can let the numbers work for me..

In a slow market, waiting for gorgeous setups with great risk/reward relationships might only provide me with one trade a week if I’m lucky.

Now, there’s probably 1-2 per day, and that’s MORE than enough.

You see, most traders feel this need to trade and end up jumping into every setup they see.

Squeezes can deliver some amazing runners. They can also drop like a stone.

That’s why I’m never afraid to cut loose any position that isn’t working the way I want.

Sure, I may breakeven or lose a small amount for a few days. But with the odds in my favor, I know the next set of winners will more than make up for those trades and then some.

One of the best ways to learn these skills is through my Millionaire Challenge.

Not only do I teach how to identify and trade setups, but you get EXCLUSIVE ACCESS to my real time trades.

Click here to learn more.

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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”