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Penny Stock Basics

Why I Love Informational Inefficiencies

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Written by Timothy Sykes
Updated 8/5/2021 10 min read

Wanna separate yourself from all the idiots who just follow hot stock picks? Learn to look for informational inefficiencies and how to take advantage of them.

You’ve probably noticed: We haven’t had a hot sector in months. That’s after a long period of one hot sector after another. Weed! Crypto! CBD! Now … nothing. Tumbleweeds.

For some traders, this change is devastating. They don’t know how to adapt, and the strategies and patterns that worked for a while just aren’t working anymore.

So how can you stay ahead of the curve — and avoid blowing up your account?

  • Be prepared.
  • Be adaptable.
  • LOOK for informational inefficiencies.

Don’t miss my recent video about informational inefficiencies:

The Thing About Patterns

Let me tell you a secret…

If you want to be a self-sufficient, intelligent trader, you have to do more than just memorize patterns.

“But Tim,” you’re thinking, “You LOVE patterns! Your teaching is ALL ABOUT PATTERNS!”

Yes, I do love patterns. In fact, my most successful trades mostly boil down to three key patterns.

But here’s the thing. It’s not about MEMORIZING the patterns. It’s about understanding how and why they work.

Patterns can shape-shift. You have to learn to adapt to be able to fully take advantage of them.

I’m Still Profitable

Lots of traders who are losing money right now are quick to blame it on the lack of hot sectors and trends.

But if that’s true, how have I still made six figures … just like pretty much every year for the past two decades?

Because I’m PREPARED for trades when they come my way. I’m watching out, because…

… informational inefficiencies can mean opportunities.

What’s an Informational Inefficiency?

In an efficient market, small news doesn’t move stocks in huge ways. But when the market’s inefficient, any news can make stocks experience huge price surges. They come on fast and furious.

Here’s an example. Not too long ago, I saw an Instagram story about BILZF. This stock went CRAZY because of an informational inefficiency — it more than doubled in a very short period of time.

I saw the story at about 3 p.m. The stock wasn’t moving that much, but after the story, it suddenly picked up. Then the market closed. Over the weekend, more and more people caught wind of the buzz.

By the time the market reopened on Monday, the price went crazy. I took advantage of it and made close to $4K.

And I took advantage of it again.

… and again.

That’s the power of informational inefficiencies.

I love informational inefficiencies. And so should you.

They happen TIME and TIME AGAIN in the market. Year after year. I talk about them in detail in my book, “An American Hedge Fund.” You can get the book for FREE with this link: https://tim.ly/timsbook.

Wanna get right to it? Flip to Chapter 6, where I talk about how I made over $100K in a single day … all thanks to an informational inefficiency.

I was able to read between the lines and anticipate that the stock price would jump. And my hunch was right. It wasn’t a fluke, either. I’ve had plenty of other amazing plays based on informational inefficiencies, like this one!

History Repeats Itself

Am I taking crazy pills? Why aren’t people figuring this stuff out?

I keep talking about things that happen OVER and OVER in the market. But most people just don’t listen.

Sure, I have some students who study hard and scale up bit by bit to become strong, smart, and self-sufficient traders.

But there are also a ton of people who just want hot stock picks.

Don’t think like that! Relying on someone else’s hot stock picks is NOT a strategy.

Instead, think about when the next informational inefficiency might pop up. It’s not a sexy term … but the results can be sexy. Find your own stocks to trade. With tools like StocksToTrade available, there’s no excuse for not doing your own research.

informational inefficiencies
© Millionaire Media, LLC

Be Prepared

I’m not some super genius. I’m not psychic. I’m not even that good at math.

But I’m diligent, and I’m PREPARED for when trading opportunities come my way.

I’ve had to learn things the hard way. I never had a mentor when I was learning how to trade. That’s why I created my Trading Challenge – so I can be the mentor I never had to my students. I want you to avoid the dumb mistakes I’ve made and to take advantage of the lessons I’ve learned!

I’ve been teaching for over 20 years. And I document EVERY SINGLE TRADE. I’m the real deal … I’m not just posting screenshots of my profitable trades without explaining them.

Ready to give me some time? Consider joining my Trading Challenge.

  • I want to teach you how to trade.
  • I want you to see how there can be opportunities in penny stocks — even though nearly the whole world loves to hate on them.
  • I want you to get to know and love these informational inefficiencies.

Recent Tweets, Comments, and Trades from Students

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Here’s a look at some of my students’ recent comments in the chat rooms and on Twitter…

From the Trading Challenge Chat Room

Recently, I posted this video where I rant about informational inefficiencies and my BILZF experience, and it set the chat rooms on fire:

SatelliteIncomeUnlimited was clearly wowed by my crazy-eyed rant: When was this video filmed? Can you put that alex jones energy in a pill for me Tim? I don’t even want that pill actually.

Redwagonridertimothysykes says, Whoever said you are a crappy trader, and that you only play the gimmies can eat their own words! you rock!

Arturoil710 offered up the chat equivalent of a high-five: Tim’s BILZF Trade was pretty sick! (cash)

Thanks, Arturoil710!

And this awesome comment from The_tipsy_nomad: His videos have the power to change our lives, as long as we’re willing to put the time in to study and learn what he’s teaching. The best mentor out there.

Thanks, The_tipsy_nomad!

Student Tweets and Profit.ly Mentions

On Twitter, @chesskid90 saw my video about informational inefficiencies and recognizes that there are no excuses:

Plenty of students love informational inefficiencies for the edge they gain over less prepared traders. Maybe Profit.ly user sab13008 puts it best: I LIKE STOCKS WITH LOTS OF IDIOTS IN THEM <3

Profit.ly user asfricksrs didn’t get in on the action but learned from BILZF: I like stocks with lots of idiots in them .. thanks Tim – hated the chopfest of NBEV – missed the BO of BILZF but learned from your alerts on it .. ty

Profit.ly user calvinw learned from the experience, too: Wow! I kind of figured it was one of your best trades. I’m embarrassed for not really catching your tip off when handed to us on a silver platter. Hopeful to capitalize next time. Thanks Tim. We like stocks with idiots, LOL.

Oh, and when it came to trading BILZF, plenty of students made great gains:

On Twitter, @hasenrahal1 reported a profitable trade:

@therealcrash89 also reported their best profit to date:

Profit.ly user EAdapon made a nice profit too: took 1k profits on this one. Thanks Tim!

Profit.ly user gjbailey36 made a solid gain, too: I like stocks full of idiots. I am one of the ones that sold some into the close as I freaked out…ha. but sold rest in the 1.9 for a solid gain. FOCUS on BFPG and clean charts.

Great work to everyone who made a profit from this informational inefficiency!

[Please note these results are not typical. These traders have exceptional knowledge and skills that they’ve developed with time and dedication. Most traders lose money. Trading is risky. Do your due diligence and never risk more than you can afford.]

How much do you love informational inefficiencies and why? Leave a comment below!

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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

* 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”