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Trading Recap

How I Cracked the Code to LIFW

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Written by Timothy Sykes
Updated 9/22/2023 5 min read

Finding the best stocks to trade isn’t difficult in this market.

All you need is a high/low scanner.

However, just because you know which stocks you should be trading…doesn’t mean you’ll make money trading them.

The real skill, and what most traders mess up on, is their execution.

When should you buy?

When should you sell?

Take profits…or cut losses?

It might be a mystery to some, but not me.

And today, I’ll show you how I finessed and pulled in a quick 10% on last week’s hottest ticker symbols, MSP Recovery (NASDAQ: LIFW).

Pay attention because this same approach is what I’ll be using to make again this week.

 

What Makes a Great Stock to Trade?

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Most penny stock traders all start their days the same way.

They open their laptops and look for the stocks with the biggest premarket moves.

I’m no different.

If you want to make a 10% gain on a day trade, then you need a stock that’s rocking 50%, 100%, 200%, or more in the premarket.

Snapping up 10% on those kinds of moves is a lot easier than trying to extract it from a stock that’s only up 20%.

However, not everyone is like me and keeps a list of stocks that made those big moves over the last few days or weeks.

Identifying a stock moving 50% in the premarket is as easy as running a scanner.

But knowing that a stock that’s up 50% in the premarket had also doubled the day before is next-level thinking.

And it’s not hard to do.

Just keep a notepad or spreadsheet and copy over the scans from the premarket and the end of the day.

This will help you identify stocks that are or are becoming multi-day runners.

And THAT’s what made LIFW such a fantastic stock to trade.

Analyzing the Charts

Take a look at the 5-minute chart below.

I’ve drawn horizontal lines at the various spots where the stock found resistance and reversed.

All of them came in around $0.24-$0.27.

A lot of traders get caught up in the specifics. This is the art form of trading, which I’ll show you in a minute.

For now, just remember that range.

Now, let’s dig into the premarket action on the day of the trade.

As the premarket session rolled on, shares lifted into that $0.24 area and found resistance.

After a short pullback, they broke through that area and began to consolidate right on top of that area around $0.262, close enough to that $0.27 area.

And it was holding as volume rose.

To me, this was a bullish sign the stock wanted to march higher.

After all, LIFW was up almost 400% from its original breakout.

Here’s where my trade analysis came into play:

  • I knew the recent highs were right where the stock was trading
  • Volume was picking up towards the open (important to see)
  • The stock was up over 60% in the premarket after a big day before

For me, this gave me a pretty good indication that I could take a shot and try to ride this stock up in to the $0.30s.

I want to point out the two ways you could enter this trade.

The first was to wait for a dip at the open.

There was a small one down to $0.24 which would have been a great spot to take an entry since it was the lower end of the recent consolidation range.

Any meaningful break below that could be used as a stop.

I chose to wait until the stock had popped through resistance, giving me an extra layer of comfort.

If you look at the 1-minute chart, you’ll see there was huge volume on that second candlestick.

I used that candlestick for my entry knowing that I could stop out if we broke back down to $0.25.

That way, I’m getting a bit more out of my potential profits than I’m risking.

Sure enough, the stock wobbled around $0.26-$0.28 for a few minutes and then popped right into $0.30 where I was able to take my exit.

Patterns & Executions

high frequency trading
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All trades come down to the patterns that create the setups and the way we execute the plays.

Each is a separate skill that takes practice and patience.

After teaching thousands of students over the years, developing more than 30 into millionaire traders, I know what it takes to help folks climb the ladder of success.

That’s why I want you to join me in my upcoming webinar where I break down the most important skills and strategies you need to reach that next level.

Click here to reserve your spot.


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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”