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Trading Lessons

My Prep Plan For This Market

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Written by Timothy Sykes
Updated 6/2/2022 6 min read

I’ll be the first to admit that I like to stay active and I’m not just talking about trading.

Life is simply too short. I don’t want to look back and feel like I missed any opportunities.

That’s why I donate my trading profits and time to charity, helping to build nearly two dozen schools in Bali.

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Check out the story on my Instagram Feed.

A lot of people assume that means I get frustrated when markets put together a string of days where my setups don’t materialize.

But nothing could be further from the truth.

As I tell my students, preparation is key to profits.

So on the days where I trade few — if any — stocks, I’m working to level up my skills and calibrate my trading.

And there are three things I focus on specifically.

Look for Missed Setups

Every day, there are two tools I use.

First, is my StocksToTrade Stock Screener.

I’ve talked about this before as it’s my go-to stock seach tool for penny stocks.

Unlike other scanners and screeners, this one includes features specific to penny stock traders including stock float, premarket volume, and more.

Plus, I can look at our proprietary Oracle tool which calculates various support and resistance levels for the top tickers every morning.

The second place I look is our Breaking News chat feature.

We hired some of the best analysts around — they comb through the news and popular chat rooms to bring you relevant and actionable trade ideas.

These two tools save me countless hours.

On top of these, I also prepare and update my watchlist of stocks that could offer potential setups.

On my prep days, I’ll go through and highlight the handful of stocks I feel provide the best trade setups.

Then, I go back later and look through the other stocks I didn’t follow to see if there are any setups I missed.

You see, some traders think you can find and play every setup on the board.

That’s not how it works.

I can identify most stocks that provide possible setups. But I have to limit my focus to just a handful based on my style of trading.

The reason I go back and look at other setups that I missed is to see if there were any overarching themes in them.

For example, this week was dominated by oil and gas stocks like Imperial Petroleum Inc. (NASDAQ: IMPP).

However, there were also plays in some Chinese companies including Huya Inc. (NYSE: HUYA).

And I’ve been a big fan of trading Sysorex Inc. (OTC: SYSX) lately.

What I don’t want to do is get so focused on one stock or sector that I miss the bigger picture.

Spotting Market Trends

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Speaking of the bigger picture, I also take some time to look at the markets I don’t trade including the major indexes.

While penny stocks often trade independently from major companies like Apple Inc. (NASDAQ: AAPL), they follow sector trends.

That’s why oil and gas stocks are in vogue with crude oil and natural prices through the roof.

A great way to see what’s working is to take a look at sector ETFs.

S&P provides a handful of them, all starting with an ‘X’, that covers everything from financials to biotech to technology.

I don’t need to go deep in my analysis. Just look at which ones are holding up and which aren’t.

Right now, the Energy Select Sector SPDR Fund (ARCX: XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (ARCX: XOP) are good for watching oil and gas stocks.

But just as important, I want to look at the trading trends as well.

Back in late 2020 and all of 2021, stocks would pop and run for days on end.

Right now, they’re lucky to make it more than a week.

This is a notable trend that can and will shift. Once it does, that tells me it may be time to look at my risk profile.

One way I do that is by taking small trades in different stocks to ‘test the waters.’ These aren’t huge positions, and frankly, you could do it with a simulated account.

What it does is keep me connected to the market movements and helps me spot patterns I might otherwise miss.

Practice Cutting Losses

what are penny stocks the bottom line
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I practice what I preach. I like to lose small and fast.

When I feel like I’m straying from this and holding onto positions too long, I will actually practice taking losses.

Again, this doesn’t need to be in a real money account. A simulated account will do just fine.

But I want to get used to the feeling of cutting a trade when it’s not going to work.

That way, I don’t freeze or rationalize my actions when I’m in the moment.

Now, I know that being accountable to yourself can be tough.

That’s why I created my millionaire challenge.

My students get access to loads of content to help them study and learn how the market works.

And now is your chance to join them.

Click here to take my millionaire challenge.

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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”