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Trading Tips-Tim Sykes Penny Stock

3 Keys To Master Price Action

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Written by Timothy Sykes
Updated 8/3/2022 5 min read

Every trader has searched for the ‘holy grail’ of indicators…the one that tells you exactly how to trade for pure profits.

Hopefully, most of you realize no such thing exists.

For years, I tried to find the secrets of the market.

It turns out they were right in front of my nose the entire time.

You see, there are only three pieces of information any trader ever needs from a chart:

  • Price
  • Volume
  • Time

The relationship between these components is critical to understanding how to identify and trade setups out of patterns like my Supernova.

News stories and other catalysts are critical as well. However, they don’t come from the chart.

Price, volume, and time are all we ever get.

And learning how to interpret each is critical.

While I could probably write a library on the topic, I want to give you the key points for each.

These will improve your chances of quickly identifying and evaluating entry and exit spots within a pattern.

You Can’t Have One Without The Other

Most folks like to think that price is the only thing that matters.

However, we know that stocks with low trading volume often have wide spreads that cost large amounts of slippage.

We know that premarket trading volume is different than the regular session. Even the main session tends to see more volume at the open and close rather than in the middle of the day.

All of these are fairly obvious.

But let’s take this deeper and look at dip buys.

This is a chart of SIGA Technologies Inc. (NASDAQ: SIGA), one of the biggest winners off the Monekypox news.

I drew a couple of arrows that point to a long tail candlestick and the associated volume.

This pullback happened within the first hour of trading but was well off the day’s highs.

Notice the shape of the candlestick.

The open is near the high of the candlestick along with the close. Below that is a long wick.

Think about this as a narrative.

Sellers came into the stock hard at the beginning. Yet, buyers stepped up with enough force to overcome those sellers and close the candlestick back near the highs.

Now, that could’ve happened because there weren’t a lot of sellers.

However, that’s where volume offers another clue.

The volume on that candlestick was the highest out of any that day.

So we know this was a big decision point where buyers and sellers battled for dominance.

Volume and price movement of this magnitude provide a potential trade setup if I want to dip buy this stock.

Ok, so what about time?

Think about how and when this occurred.

This wasn’t right at the open when the trading volume is almost always higher than the rest of the day.

It happened after volume had already died down.

Compare that to another chart of SIGA below.

On this day, volume started and stayed high all day while shares kept moving higher and higher.

In fact, the pullbacks, although short, tended to coincide with lower volume.

So it wasn’t much of a surprise when volume dropped the following day that price slid lower.

Understanding Time

Price and volume are typically easy for folks to wrap their heads around.

Time is a bit harder.

So let me explain it using a chart of FaZe Holdings Inc. (NASDAQ: FAZE).

Back on the 22nd, shares jumped in the post market, with the stock trading in a wide range on heavy volume the following day.

For the next several days, price traded on elevated volume in a tight range.

If a stock can hold the higher end of its trading range after a huge move, chances are it will make another move higher.

And the longer it takes for this to happen, the more likely it is short positions will build up and create the conditions for an epic squeeze.

Final Thoughts

Next time you’re about to enter a trade, try to build a story in your mind like I did here.

Ask yourself who’s in control and how long they’ve been in control.

These answers will help you decide whether the setup is likely to work or fail.


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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 (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”