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Trading Tips-Tim Sykes Penny Stock

Don’t Let Them Sell You Snake Oil

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Written by Timothy Sykes
Updated 5/23/2022 5 min read

Hey trader. Tim here.

I think Cathie Wood is a charlatan and a terrible investor.

There, I said it.

Her flagship fund — the ARK Innovation ETF (NYSEARCA: ARKK) — is down more than 66% year-to-date.

But her dismal performance isn’t the reason why I’m so down on her…

After all, if you stick around this game long enough, you’ll most likely have to deal with drawdowns.

The problem with Cathie, and a lot of the other talking heads, is that they can’t admit when they’re wrong.

And eventually, their stubbornness leads to portfolio destruction.

As I told my Trading Challenge students the other day, those folks who boasted about Netflix Inc. (NASDAQ: NFLX) being such a great company with incredible management…

…they need to shut up. The stock sucks.

Making these idiotic statements keeps people from accepting reality.

Over the past several months, I’ve prepared my students for the crash I called back in November.

And there was one crucial lesson that applies to both trading and investing that everyone needs to hear…

News vs. Hype

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These days, it’s nearly impossible to differentiate between news and opinion, fact and fiction.

Traders struggle against the constant flood of misinformation and gaslighting.

What makes it worse is getting sucked so far into this mindset that real headlines seem doubtful.

That’s why hedge funds pay hundreds of thousands of dollars every year for exclusive access to curated news from Bloomberg Terminals and others.

I’m incredibly thankful that our StocksToTrade platform’s Breaking News team does the same thing for retail without breaking the bank.

Every morning, I check in with these guys to find out what’s moving the stocks that I want to trade.

Plus, they let me know when other popular chat rooms are potentially pumping a stock up.

Here’s a piece of news they dropped on Friday with some incredible results…

In the world of trading … Accurate, timely information is more important than ever.

It also takes practice and experience to recognize which headlines give stocks real momentum and which stories only offer fleeting gains.

Now, I’m gonna tell you something that might seem obvious…

Most penny stock news runs on hype.

Don’t get me wrong … When a pharmaceutical company announces the results of a trial, that’s legitimately good news.

But it isn’t in the same ballpark as actually selling the product.

Real News is Now

Cathie Wood bet a lot on future growth.

Then the Fed stepped in and started raising interest rates.

Now, the markets are telling her (and everyone else) that future growth isn’t as important as earnings are in this environment.

News that drives a stock for months (or years) is based on what’s happening at the moment.

That’s why good earnings can be a powerful catalyst for companies — one of my favorites to induce short-squeeze plays.

This same concept applies to long-term investments and large-cap companies.

In fact, one of the best ways to identify a hyped-up stock is through my Supernova Pattern.

When I see a stock rise into the stratosphere, and the company doesn’t even generate positive cash flow, I know something is wrong.

Just look at a stock like Virgin Galactic (NASDAQ: SPCE)…

Is this stock tradeable?

Absolutely.

But it’s far from investible.

Yet, talking heads are still prancing around on financial networks talking about how cheap this stock is or that stock is.

A long time ago, I learned a valuable trading lesson — just because something is cheap doesn’t mean it can’t get cheaper.

The #1 Tell for Any Stock

Tim Sykes in a boat in Italy checking the stocks on his top penny stocks list
© Millionaire Media, LLC

Price action. Plain and simple.

If I want to know where a stock might be headed, I look at the price action before anything else.

That’s how I’ve been trading this market for the past several months.

If the economy is heading into the toilet, there probably won’t be a ton of great news coming.

That said, there are still plenty of trades out there.

When I use price action to find setups — such as a breakout above the highs on a low-float stock, or the morning panic — I don’t have to worry about what’s going on in the broader market.

I simply focus on the trade at hand, which can (and often does) move independently of the overall market, especially if I’m trading penny stocks.

Final Thoughts

Headlines about a hedge fund’s market outlook, or some shmo on television talking about their latest themed investment, aren’t what I care about.

When I trade, I want two things: solid price action and real news.

Using the news means looking at the facts of what’s being reported.

I want to see tangible statements about an activity.

That’s what counts in this market.

—Tim


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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 (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”