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3 Common Mistakes When Dip Buying Too Early

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Written by Timothy Sykes
Updated 9/29/2021 9 min read

3 Common Mistakes Dip Buying Too Early: Key Takeaways

  • You MUST keep things in perspective or risk a muddled mindset.
  • Why promoters try to create a ‘soft landing.’ (And how THAT creates a predictable pattern.)
  • Which common mistake did Jack Kellogg make on his biggest-ever loss? Keep reading…

Be sure to read “How To Spot the Top of a Penny Stock Pump.” It explains a new way I’ve found to identify topping action. I used Ilustrato Pictures International, Inc. (OTCPK: ILUS) as an example of how it works.

In this post, I’ll review my bungled ILUS trade and explain three common mistakes dip buyers make. First, let’s review…

Why Promoted Stocks Crash and Bounce

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Promoted stocks crash because they’re promoted.

Promoters accumulate shares before or during the promotion. Sometimes they’re paid with shares, and sometimes they buy shares ahead of time. When they stop promoting and start selling … it’s like a jet without fuel.

Why do promoted stocks bounce? The promoters need to create a soft landing so they don’t get investigated. That’s why I like promoted stocks. They have predictable panics and bounces.

That said, you don’t know exactly how soft a landing the promoters will create. Sometimes they try to repump to create a soft landing but it doesn’t work. And that leads to common mistakes.

Do You Make These Mistakes Dip Buying Too Early?

The first mistake below is the one I didn’t make on ILUS. Take heed, because it can be very costly…

Dip Buying Too Early Mistake #1: Adding to a Loser

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I have nearly two dozen millionaire students now.* If you look at the trades of the top ones, one of the biggest mistakes they made is adding on dip buys that don’t bounce.

A great example is Jack Kellogg’s MadMen Enterprises, Inc. (OTCQX: MMNFF) trade from February 11, 2021. Based on the setup, you couldn’t argue with Jack’s thesis. MMNFF was a multi-day runner that was up big, and it was finally cracking.

Jack entered early, which is dangerous enough on a dip buy. Believing you’re right and adding only compounds the mistake. As the stock continued to drop, he averaged down. I don’t know the details of all Jack’s entries and exits. This chart shows his first two entries…

MMNFF dip buying mistake
MMNFF chart: Feb. 11, 2021, Jackaroo, common mistakes dip buying too early — courtesy of StocksToTrade.com

Jack tried to scale into a losing position, trading a total of 2.4 million shares of MMNFF that day. When it didn’t bounce, he was forced to close his positions for a 20%, $367,024 loss.

Before I move on to the second common mistake when dip-buying too early, it’s only fair to…

Put Jack’s Trade in Perspective

While Jack’s loss seems massive, the same day he closed a swing trade for an 893% win and $132,111 in profits.* (Jack’s stake in that trade was $14,835.) It was also his biggest week ever with total profits of $1,373,264.* To put that in perspective, it’s more than I’ve made in all of 2021 so far.

Jack prepared for the hottest market in decades and pushed it harder than anyone I know.

Just be aware that adding to a loser is dangerous. Jack already knew that but he’ll never forget the trade. Sometimes it takes the pain of a big loss to burn a rule into your brain.

Back to ILUS…

Dip Buying Too Early Mistake #2: Wanting It Too Badly

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After ILUS promoters came out of the blue to attack me on social media, I was prepared. And even though I captured the morning panic, I got faked out on the bigger panic. This brings up an interesting, counterintuitive part of trading…

I was so prepared it led me to enter early, opening me up to losses. That’s why I say it’s good to…

Be a Retired Trader

Say to yourself, “I don’t need to trade.”

Part of the reason I keep busy is because it prevents me from overtrading. I know these patterns so well it’s almost, “Let me trade, let me trade…”  Like a kid saying, “Put me in coach, put me in.”

That kind of hunger, obsession, and addiction is dangerous to traders. Even though I know the patterns, there are fakeouts sometimes. I prefer to get called away from my busy life to come back to the markets when a trade is so good I’d feel guilty missing it.

Because of how much the stock was up, and the number of promoters, I entered on the first green candle. I thought it was the bottom. Then I cut losses into the big drop, which turned out to be the real bottom.

ILUS penny stock chart
ILUS chart: Sept. 22, 2021, common mistakes dip buying too early, morning panic — courtesy of StocksToTrade.com

My being so prepared made me want it that much more. After cutting for a loss, I watched it turn. Then my head was all screwed up because I jumped the gun.

Some people reading this will ask, “Why not just hold until it hits the bottom and ride it back up?”

Refer to rule #1: cut losses quickly. Panics don’t always bounce. Remember Jack’s MMNFF trade above. It’s better to cut losses and walk away. Hold and hope is not a strategy.

To Buy or Not to Buy the First Green Candle?

That is the question…

Sometimes if you don’t buy the first green candle, you miss out. So I’m not saying don’t buy the first green candle. But be aware of your mindset and don’t fall for the next common mistake…

Dip Buying Too Early Mistake #3: Forgetting Other Indicators

Trading isn’t an exact science. Over the years I’ve developed a checklist of indicators. After 20 years of trading, it’s a mental exercise rather than something I write down.

But sometimes, if you want it too badly, you lose perspective.

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I should have been aware of my mindset. And I should’ve thought everything through. ILUS was choppy. And even though it fell off a cliff from $0.31 to $0.29, that’s only a 6.5% drop. That’s not really enough. I should have been more patient.

When you get faked out like I did with ILUS, you start thinking…

“Wait, I might be a little off. Do I really know these patterns?”

And THAT affected my next trade on Cyberlux Corp. (OTCPK: CYBL). It was a $266 win, but it coulda, shoulda, woulda been much bigger.* My head was all screwed up because of ILUS and I missed out.

The Importance of Reviewing Trades

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I’m not very proud of the wasted opportunity on ILUS and CYBL. The important thing is to learn from every trade. Figure out what you can do better in the future. Be honest with yourself. And be transparent by posting your trades on Profit.ly.

However you do it, review every trade. Profitable traders get that way by testing, tweaking, and reviewing data.

Trading Challenge

This post scratches the surface of what you should know about dip buying promoted stocks. All my top students refined their trading skills in the Trading Challenge. If you want to learn the nuances and hone your skills, apply for the Trading Challenge today.

What do you think of the 3 common mistakes when dip buying too early? Comment below, I love to hear from all my readers!


*Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work.  Most who receive free or paid content will make little or no money because they will not apply the skills being taught. Any results displayed are exceptional. We do not guarantee any outcome regarding your earnings or income as the factors that impact such results are numerous and uncontrollable.

It takes years of dedication, hard work, and discipline to learn how to trade. Individual results will vary. Trading is inherently risky. Before making any trades, remember to do your due diligence and never risk more than you can afford to lose. I’ve also hired Jack Kellogg to assist in my education business.

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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

* 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”