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Trading Lessons

The #1 Factor Behind My Trades

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Written by Timothy Sykes
Updated 5/24/2024 5 min read
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Happy Memorial Day!

The stock market is closed today … That’s very exciting …

It means we’ve got a shortened trading week. And short trading weeks are notoriously volatile.

Here’s why:

There are fewer days in the market to pull profits. And greedy market players are still trying to squeeze out as much cash as possible.

I expect the volatility this week to be off the charts!

  • Market indices are trading near all-time highs.
  • The market’s poster boy, NVIDIA Corporation (NASDAQ: NVDA), gapped up on strong revenue last week.
  • We’re still seeing meme stock volatility: Innovative Eyewear Inc. (NASDAQ: LUCY) spiked 300%* on Friday.
  • The U.S. Presidential election draws near.

The stock environment right now is INSANE. And small-account traders are in the best position to profit.

See my Tweet below:

But not all stock spikes are created equal …

Today, before the market opens for a shortened trading week, we’ll cover THE BEST setups for small-account traders.

These are the best setups for me and my students.

The Strongest Stock Spikes

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It’s impossible to tell the future.

But after 25 years of trading, I can tell a good stock spike from a bad one.

And when it comes to our small-cap niche, there are a group of stocks that are most likely to show us strong spikes.

This one factor determines the stocks we want to focus on for the best chance at profits …

  • The LUCY spike from Friday fits this one factor. So does …
  • The 730%* from MGO Global Inc (NASDAQ: MGOL) last week …
  • The 340%* spike from Mangoceuticals Inc. (NASDAQ: MGRX) …
  • The 240%* spike from GT Biopharma Inc. (NASDAQ: GTBP) …
  • The 130%* spike from Biodexa Pharmaceuticals Plc (NASDAQ: BDRX) …
  • The 550%* spike from OneMedNet Corp (NASDAQ: ONMD) …

You catch my drift?

Stocks with this one factor are capable of spiking +100% intraday. And these are the stocks that we want to trade!

If a stock spikes +100%, we have more room for error. A trader can take 20% of the move to mitigate overall risk. Don’t swing for the fences, trade smart.

We don’t have to make $1 million on every trade. Small gains add up!

Take a look at my $7.6 million profit chart below, it consists of 8,200 small trades that built up my account over time:

Source: Profit.ly

And don’t worry, the patterns don’t go away. I’ve been using the same trading framework for over 25 years.

Focus on one trade at a time, and then move to the next hot stock that matches my framework.

That’s what I’m looking for when the market opens on Tuesday.

And the hottest setups have this one factor in common …

A Low Supply Of Shares

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This is a simple law of supply and demand

When an asset has a low supply, an increase in demand will cause the price to spike higher when compared to an asset with a higher supply.

For stocks, the supply is the number of shares available for traders to buy and sell in the market. It’s also called the float.

Big stocks like NVDA have higher floats, especially after the upcoming stock split. Currently, NVDA’s float measures 2.4 billion shares.

As a result of the higher float, the price has a difficult time spiking by a larger percent. Shares are only likely to move a few percentage points in a single day.

But when it comes to our small-cap plays, the low float count can cause stocks to spike +100%.

Generally a low float is anything below 10 million shares. Now, there are exceptions. This is an inexact science.

For example, MGRX from last week spiked 340%* and StocksToTrade shows that the float is 12.7 million shares. Technically that’s above our goal of 10 million shares or fewer. But it’s close enough, especially when compared to 2.4 billion shares LOL.

On Tuesday morning, pay attention to small-cap stocks spiking with a low float. That’s where we’ll find the strongest runners.

And you can use Breaking News to find these spikers right when they start to move. It usually happens during premarket. Below you can see the alert that we got on MGOL last week:

MGOL chart intraday, 1-minute candles Source: StocksToTrade

Timing is everything in the market.

The early bird gets the worm.

Get ready for Tuesday morning!

Cheers.

 

*Past performance does not indicate future results

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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”