timothy sykes logo

Trading Recap

$ILAG – Terrible Business, Great Trade

Timothy SykesAvatar
Written by Timothy Sykes
Updated 9/4/2022 5 min read

CNBC wants you to think that great trades only come from trading blue-chip stocks.

The truth is the majority of my BEST trades come from some of the most worthless pieces of garbage out there.

Take Intelligent Living Application Group Inc. (NASDAQ: ILAG).

This stock landed on my watchlist after its IPO in July. In early August, shares went parabolic without any major headlines, doubling within 24 hours and then nearly doubling again a week later.

And you know what this company does?

It makes digital locksets, the kind used to open hotel room doors…

Actually, it doesn’t make them yet. The company still needs to develop its product.

Who can honestly get behind a company like that as a long-term investment?

Thankfully, neither I nor my students care about who or what these businesses do.

All we’re interested in is the price action.

Now, any stock that’s been a recent runner immediately gets placed on my daily watchlist just in case something like Monday happens.

While shares barely budged in premarket, the stock quickly caught a bid, sending the price higher.

I managed to trade this for some quick gains, though not as much as I could have.

That’s why I want to review this trade and show you where you might have found potential entry and exit points.

The techniques I’m about to cover can be used on any chart to help you construct your own trade setups.

What’s Your Framework?

should you buy depositary receipt
© Millionaire Media, LLC

Despite my outgoing personality, I’m not a huge risk taker.

Every trade I select aims to keep my potential losses as small as possible while maximizing potential profits.

I start by identifying the pattern I’m working with. It might be a Supernova or a former runner.

The pattern provides the framework for the setup. Each pattern contains different spots that work better for different setups.

ILAG fell into the IPO category. If you study IPOs and SPACs long enough, you’ll start to see different patterns emerge.

Keep in mind that certain patterns occur more often in risk on vs. risk off environments.

Right now, we’re at the upper end of a bullish push inside of a larger bearish downturn. That’s given small-cap stocks, mainly non-OTCs, more momentum lately, sending some of them on multi-day runs.

FaZe Holdings Inc. (NASDAQ: FAZE) is a good example of a multi-day runner driven higher by promoters and pumpers.

A few months ago, most of these stocks would die after a first or second-day run.

This tells me the broader market is ripe for runners.

So, instead of looking for panic dip buys in the early morning, I’m focused on dip buys into an uptrend.

Dip buys do a better job of managing risk than buying into pops or consolidations.

I know when I buy into a dip the stock should stop in and around my support level. If it doesn’t, then I can either average down or exit the trade.

For newer traders, it’s better to wait for the bottom to form before stepping in. While you may not get as good of an entry, it reduces the odds you buy a stock that keeps falling.

ILAG Potential Entries

Let’s apply that to ILAG and see what kind of possible entries we can identify.

After the initial boost from the open, shares traded sideways in their first consolidation (1).

This offered a short pullback that could either be used for the entry or traded against at the low, which is where I drew the first white trendline.

Then, shares made a similar move (2), albeit smaller, with another pullback to trade against.

I grabbed this one at $3.17. However, a newer trader might wait for that tail candle to form the low and then buy against that at around $3.25.

From there, shares spiked up past $3.50 before pulling back one more time.

I used this spike as my exit.

A trader could buy the pullback (3). However, if they bought in the second move, they’d be at their stop and be forced out of the trade.

That’s why it’s important to stick to the rules and lock in profits when you can.

The 3rd move could have easily snapped back to the lows. I never want to let a good trade go against me.

Now, there’s another possibility for entry when shares break over the morning high of $3.60.

To me, that leaves a lot of room for downside if you don’t have a tight stop.

The Bottom Line

tim sykes in a cave in sedona arizona
© Millionaire Media, LLC

Once you identify a pattern, it’s much easier to locate setups within that pattern.

Play around with these (with simulated funds or very little at stake) and find out which entries make the most sense and work best for you.


How much has this post helped you?

Leave a reply

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

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

* 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”