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A Lesson in Safe Penny Stock Trading: How to Sell Into Strength

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Written by Timothy Sykes
Updated 10/26/2021 9 min read

Sell Into Strength: Key Takeaways 

  • Why you don’t have to catch the bottom and top of every move…
  • How to sell into strength with a $1,755 trade example…
  • Find out how you can learn to trade penny stocks with me and see my top penny stock education resources…

If you want to grow a small account over time, you need to learn to sell into strength. My rule #1 is to cut losses quickly, but many times I cut profits quickly too. If that seems counterintuitive, keep reading…

Focus on Your Education First

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You have two accounts: your trading account and your knowledge account. You have to grow your knowledge account first — before you even think about the money.

And right now is an amazing time to learn…

The recent stock market’s the best I’ve seen in decades. But it also taught a lot of new traders some bad habits.

You have so many ways to grow your knowledge account. You can paper trade using StocksToTrade. Watch the stocks my students and I trade each day to understand the process. (See all my trades here.)

Plus, I share even more ways for you to learn below.

What Is Selling Into Strength?

Selling into strength to me means I exit my long positions when a stock’s moving higher.

I aim to take the meat of the move. I don’t hold and hope a stock will keep spiking. And I don’t wait for a stock to panic before I cut losses.

I often underestimate penny stocks and sell too soon.

That’s OK. I don’t time my trades perfectly. And I don’t catch the bottom and top of every move. Yet, I’ve still grown my brokerage account exponentially by selling into strength.

I’m in, out, and on to the next trade.

How to Sell Into Strength: Trade Example

trading patterns types
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Like I said, hot markets can teach new traders the wrong lessons. And penny stock promoters LOVE to prey on uneducated newbies.

They say things like, “Those who sell are weak!” Actually, the opposite is true.

Weakness is going into a trade without a trading plan or clear risk levels.

Want to know how my top students and I have grown our accounts over time? We build our knowledge accounts AND sell into strength whenever possible.

Learn to take profits along the way. Singles add up over time. Cutting losses quickly and selling into strength are smart things to do.

Let’s review one of my recent trades as an example…

ILUS International Inc. (OTCPK: ILUS)

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ILUS was a HUGE penny stock pump. Congrats to the promoters for holding this one up so long.

It climbed from roughly 10–48 cents within a month.

I dip-bought the morning panic on September 28. It was also the stock’s first red day. I bought 65,000 shares at 39 cents and I sold them at $0.417 for a profit of $1,755.

You can see from the chart that I didn’t catch the exact bottom and top. Again, I aim for singles and sell into strength. Then I move on.

ILUS penny stock chart with entries and exits
September 28, 2021, 1-minute candle — courtesy of StocksToTrade.com

Before I bought ILUS, I called the top of this penny stock pump in a video lesson to Challenge students. Here’s how I spotted the top.

And if you still don’t know what I mean when I say to sell into strength…

Study the Past to Prepare for the Future

So far in 2021, I’ve made over $1 million in trading profits. How? I take it one trade at a time while focusing on my rules for safely trading penny stocks.

You can learn from me. Here are just a few things to keep in mind as you go through my lessons and trades…

  • What made me take a trade?
  • What was the news catalyst and how did I find out about it?
  • My goals for the trade — when to cut, hold, and sell into strength.

My lessons and webinars are your opportunity to learn from me. Plus, there’s more to learn on my blog and in my YouTube videos. And you can review my trades.

All this can help you understand how I think about and approach trades.

Learn to Sell Into Strength

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If you can learn to sell into strength, it can take a lot of the frustration out of penny stock trading. My thesis is wrong sometimes, but I often still get a small win.

Other times, I underestimate the move — like in the ILUS trade review above.

Either way, it takes the stress out of trading when you cut losses mechanically. With experience, you’ll learn to recognize a wall of sellers. You’ll know when you’ve overstayed your welcome. (Not sure what a wall of sellers looks like? Study my “Learn Level 2” guide.)

And you’ll learn to sell before you hit the wall. Or at least as soon as you see it.

That doesn’t mean you won’t have losses. And it doesn’t mean you won’t be dead wrong sometimes.

But continuous frustration will be less likely. And … you’ll have a better chance to find consistency.

So study my trades and ALL my top students’ trades. Learn everything you can from Jack Kellogg, Roland Wolf, Mike “Huddie” Hudson, Matt Monaco, and Kyle Williams. That’s the short list of incredible traders you can learn from…

All my top students are part of the Trading Challenge. Apply to the Challenge here.

See how often we sell into strength even when we could’ve made more. It’s less stress and pain over time.

Like the rest of trading, learning to sell into strength takes time and experience. But once you start to lock in profits along the way, singles can start to add up.

Trading Education Resources to Help You Learn to Sell Into Strength

conclusion reversal cadlestick
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Want more resources? You got it.

If you want the full trading education all my top students received — apply for my Trading Challenge now!

Leave me a comment if you understand this lesson and how crucial it is to sell into strength!


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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”