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Trading Recap

When To Pivot: Navigating Market Volatility

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Written by Timothy Sykes
Updated 2/21/2023 6 min read

Everyone has a plan until they get punched in the face.

That saying was made famous by former World Champion boxer Mike Tyson, who I’ve had the pleasure to meet and spend time with.

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Trading has allowed me to travel the world and meet interesting people like Mike Tyson. This is a photo of one of my millionaire students Kyle Williams, Mike Tyson, and myself. 

It’s also a great reminder to traders right now, given all the market volatility we’ve been experiencing the last few weeks.

The markets don’t care about your plans or predictions.

You’ve got to be ready to pivot.

And that’s exactly what I had to do on Tuesday…

Despite spotting the perfect setup and putting myself in an advantageous position to book profits…

The market opened up significantly lower, forcing me to change my plan.

Today I want to spend some time talking about that setup and why I liked it so much.

And despite taking a loss, I will trade it again the next time I see it.

 

High Probability Setup In Cecors Inc (OTC: CEOS)

Most of my students who join my program don’t have the luxury of trading full-time. They’re still working their 9-to-5, attending college, or caring for their family.

I can relate.

I spend most of my time traveling and working on my charitable foundation. For example, I worked with my charity last Friday in Asia.

The time difference makes it difficult for me to trade the close—however, I saw a setup that I liked and decided to take it earlier than I normally would have.

It was in Cecors Inc. (OTC: CEOS).

Early on Friday, the company posted this tweet:

Breaking It Down

The company announced it would be issuing a press release shortly. To the naked eye, that’s nothing special. After all, all they said was they were filing legal paperwork.

And in my opinion, the tweet was meant to attract newbie traders and promoters to the stock. A move that would likely pump the stock higher.

If you look at the daily chart, you’ll see the stock has traded well after issuing out press releases.

It’s gone from $0.02 to $0.09 in just a few short weeks.

And if you look at how it reacted following the tweet, you’ll see that the stock reacted positively.

My Thought Process For The Trade

As I mentioned, there was nothing special about the tweet. But by doing my homework, I knew that the stock reacts well to press releases.

When looking at trades like this, I’m not judging the catalyst as much as I’m thinking about how traders will react to it.

You see, most traders who get into penny stocks are not sophisticated. They often react emotionally to stock pumps and have wishful thinking when they get into trades.

But I’m just trying to ride the pump, take profits, and move on to the next trade. From my experience, I’ve learned to expect the worst from these companies.

Ideally, I would have bought the stock much later in the day, but given that I was in Asia, I knew that I wouldn’t be around in the afternoon to trade this, so I decided to take a small position in the morning.

I really liked the price action because the stock was holding up well, despite its massive runup.

In fact, it was consolidating nicely.

Looking at the volume before Friday, you’ll see it was dying down a little. I saw that as a positive because there weren’t that many sellers.

I planned to take the stock long and look for a profit opportunity on Tuesday.

How It Played Out

The company didn’t issue its press release over the weekend. And the market opened up sharply lower.

Because I had a small position, roughly 45,000 shares, I decided to add to it in the morning, bringing up to 90,000 shares.

However, the stock didn’t bounce like I thought it would, and given the overall market was under severe pressure, I decided to take a small loss on the trade.

This trade had a lot of good things going for it, but that doesn’t mean it was guaranteed to work.

There’s no sure thing in trading. All we can do as traders are spot opportunities that we believe have a strong likelihood of winning and then manage the risk accordingly.

Despite this trade not working in my favor, I would take this trade again in a heartbeat.

If the company had issued its press release over the weekend, I believe it would have likely pushed the stock higher despite the weakness in the market.

However, it didn’t, and I had to change my plan.

Takeaways

  • Expect the worst from these companies. I know that sounds cynical, but after 20+ years of trading penny stocks, I’ve found that to be the best approach.
  • Anticipate how newbie traders will react to the press release. Most people trading penny stocks are not sophisticated traders. They often react emotionally to stock pumps and go into their trades based on hope, not a trading plan.
  • Ride the pump. These are all speculative plays, never investments.
  • Not all good setups work. Be willing to accept a small loss instead of being stubborn.

 

This Thursday night, I will be hosting a special live training. I’ll be discussing the current state of the markets and going over one of my favorite strategies to trade right now.

Click here if you’d like to attend


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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

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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 (205) 851-0506 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”