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Trading Recap

I Sold $VAPR Early For Good Reason

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Written by Timothy Sykes
Updated 7/19/2022 5 min read

Ask any of my students, and they’ll tell you I’m a fairly conservative trader.

I cut my losses quickly and lock in profits when I can.

Even before I enter a trade, I know where I want to take profits.

Vapor Brands International Inc. (OTC: VAPR) is a great example.

I made two outstanding trades in this name on Friday and Monday.

All my trades are open to the public right here…

These plays netted me roughly $1,636.

Yet, I know plenty of folks who said, “Tim, you left so much on the table.”

And guess what…they’re right.

They don’t realize that this works out better for me over time than other strategies.

Let me show how a simple shift in risk management could vastly improve your results.

Catch a Penny

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My win rate stands at 77.15%. Let’s call it 75% for argument’s sake.

In order for me to break even, I need to make $1 for every $3 I risk.

Now, assume that I let all my trades run a bit longer.

This could lead to three possible outcomes:

  • If I can close the trade at a better price, I get same win rate with higher average profits.
  • If I take partial profits and then stop out at breakeven on the remainder, I keep the same win rate with lower average profits.
  • If I try to ride the entire amount and the stock reverses so I stop out at breakeven, I get a lower win rate.

I won’t force you to do to the math here. But essentially, I would need to be able to achieve significantly higher profit targets on most of my trades to justify a lower win rate.

For example, if my win rate drops to 65%, I now need to make $1 for every $1.86 I risk, almost double what I had to achieve before!

This is a big reason why I don’t try to go for glory most of the time.

Yes, I will do it in the right environment under the right conditions.

Otherwise, the juice isn’t worth the squeeze.

Right Conditions

what are penny stocks and whats the difference between penny stocks and regular stocks
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Why was I so cautious with VAPR?

For starters, we’re in a bear market tha’s slowly bleeding lower with lackluster rallies.

This is wholly different from the risk on environment that took hold of stocks after the bottom in March 2020.

Back then, stocks would climb for days and days.

Although there’s been an uptick in the number of multi-day runners, it’s not as wide spread as it was back then.

Second, we’re in the middle of the summer lull.

This is the time when volume tends to lighten up and stocks chop around more than pick a direction.

Let’s go back to the chart of VAPR.

There’s no way I could’ve known shares would climb level after level for two days straight the way they did.

The stock went from $0.02 to $0.09. That’s an insane move on some fairly benign news event.

But take a look at the highs shares made as they climbed. Most were followed by significant pullbacks.

Trying to hold into those is difficult even for the best traders out there because who wants to risk a stock that’s more than doubled flipping like a pancake and destroying any profits they made?

Plus, this was not a low-float stock with 337 million shares.

That lends itself to far more chop than a symbol with less than 10 million shares.

The Bottom Line

Most traders struggle to consistently turn a profit because they want to capture those huge wins.

Trust me when I say base hits add up.

Instead of trying to hit home runs, focus on locking in profits and cutting losers quickly.

Narrow the amount of volatility your account sees and work to streamline your performance.

Only once you obtain a decent win rate should you consider trying to go for more. And even then, you want to be careful and guarded.

But never ignore the context of the current trading environment.

—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”