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Scandals- Day Trade Penny stocks

Escape The Chat Room Trap

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Written by Timothy Sykes
Updated 2/13/2023 7 min read

I get it. Trading can be a lonely endeavor. And chat rooms can be a great place for traders to connect with like-minded individuals. When used correctly, a chat room can be an asset.

But unfortunately, most newbies use chat rooms the wrong way, ultimately costing them.

The Dark Side of Chat Rooms

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Many chat rooms are in bed with brokers. They’ll throw out “plays” simply to get you to trade more. My guess is they have some sort of arrangement with these brokers that pays them based on your trading volume.

In other words, some of these chat rooms want you to trade more, regardless if the setup makes sense. They don’t care if you make money or not…they just want you to churn your account, making their partners happy—the brokers they’re in bed with.

But that’s not the only reason to be skeptical of chat rooms…it gets worse.

Some chat rooms call out plays because their friends are long and want to use you to create liquidity…allowing them to dump their positions and profit off the pump.

Remember Atlas Trading?

Those guys are wearing ankle bracelets now…

Source: Bloomberg

And let’s not forget the cryptic chat rooms. You know, the ones who only highlight plays after the fact, then hop on social media, bragging about how easy the play was and how they crushed it.

Meanwhile, they offer zero transparency.

That’s why I love Profit.ly

You can see all my trades…the good…the bad…and the ugly.

Chat rooms can be great when people share information you can take to make your own decisions. But if you want to become an elite trader, you can’t rely on chat rooms or alerts, for that matter, for your trade ideas.

You’ve got to become the best version of yourself. Not someone who thinks they can succeed by copying and pasting someone else’s ideas.

That’s why I’m so proud of my millionaire students. Take Mark Croock, for example. He has taken what I’ve taught him and applied it to trading options.

He has banged out five-figure winning trades this year utilizing his options strategy. Yet, I don’t trade options at all.

While Mark credits me for developing his skills as a trader, he took those skills and developed a strategy that works for him.

Matt Monaco, another of my millionaire student, found success trading NFTs…something I’ve not traded.

Jack Kellogg has made over eight figures in trading profits…He does a lot of his damage as a short-seller. Yet I rarely, if ever, these days, short stocks.

You see, these guys aren’t waiting for me to tell them to buy this or sell that…they’ve got their own ideas…their own methods of trading.

They took what I taught them…refined their process, and created guidelines.

There’s no magic formula in trading. Nothing works all of the time. But if you study the past, you’ll notice some patterns repeat. At the end of the day, we’re just trying to make educated guesses on how a stock will react.

Despite $7.5 million in trading profits…I’m a much better teacher than I am a trader. And with 32 millionaire students, the results speak for themselves.

Based on my long track record…I can confidently tell you the patterns I teach my student’s work. They work for me, but they might not work for you. That’s why you must refine what I teach to fit your trading style.

The Level You Must Strive For

timothy sykes in matera in 2022
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You won’t crack the seven-figure club by copying and pasting trades from a chat room. You’ve got to become your own trader.

And that starts with developing a trader’s mindset.

Often in trading it’s not the markets who beat us, it’s ourselves. Newbies come into this game thinking that if they can just learn the patterns and setups they’ll instantly find success.

Wrong.

You also must become aware.

Here are some questions that you can ask yourself that can help you make better trading decisions:

  • Am I focused on trading today? Right now I’m traveling and working on my charity. My mind is not 100% on trading. This awareness tells me to trade smaller and trade less.
  • What is the market telling me? One of the worst things you can do is pick a fight with the market. The market is wrong. This stock should be trading higher. You need to cut that kind of thinking out, accept when you’re wrong, and swallow your pride. Right now, the market is telling me that huge spikers aren’t following through. To me, that means taking profits faster. For example, check out this chart in the ticker symbol VERB.

The stock popped on the news that it was fighting illegal short-selling…and then it faded.

  • What is my trading telling me? You want to press it when the market is hot, and you’re trading well. And lay off when it’s choppy or going through a losing streak. So far this year, I haven’t had a lot of big wins. However, I did have a nice $6K winner in the ticker symbol GTII (risked $30,863.25 in capital). My trading is telling me to stay patient and wait for solid setups. In January, stocks were on fire, but they’ve now cooled off. For my style of trading, I want to trade less. However, this could be your time to shine if you’re a short-seller. That’s why you have to answer these questions yourself.

Bottom Line

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Trading is not a one size fits all thing. If you want to become an elite trader, understand that you won’t get there by following shady chat rooms and alert services. I’ll teach you the skills for trading.  But to take it to the next level, you must develop your own trading style that works for you. It starts by building awareness around you and asking the right questions.


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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

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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 (205) 851-0506 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”