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Penny Stocks-Timothy Sykes Millionaire Challenge

What Newbie Traders Don’t Know and Why the World Hates Penny Stocks

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Written by Timothy Sykes
Updated 1/6/2023 17 min read

This is for newbie traders or anyone who’s ever been stuck in a penny stock for too long…

This is for you, the believer … And you, who’s been sold a pack of lies from promoters.

It’s for those of you who don’t even realize you’re getting stocks marketed to you.

Let me remind you that I’m not a hater. My goal is to educate people. Which is why I want you to know…

What Newbie Traders Don’t Know

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Most penny stock companies fail. But before they fail, they often help company insiders and executives make a lot of money.

They might be legit companies. I’m not saying they’re doing anything illegal. But the stocks get pumped up and promoted. And the truth about promoted penny stocks is that they’re bound to fall within a few days or a few weeks.

That’s why I teach patterns. Keep reading for more information about my strategies. But first, it’s crucial you understand why penny stocks get promoted. Let me show you an example…

Genius Brands International, Inc. (NASDAQ: GNUS)

Genius Brands had SO many press releases about its new cartoon network. Then it got the attention of the Twitter pumpers. Look at the GNUS three-month chart…

GNUS penny stock chart
GNUS chart: 3-month, daily-candle, example of a promoted and diluted penny stock — courtesy of StocksToTrade.com

When the traders were spreading GNUS rumors, the shares outstanding doubled. In a WEEK! In other words, they diluted it.

A lot of people don’t understand the dangers of penny stock dilution. I’ll be blunt: if you bought before the dilution, the value of your shares got cut in half. But the CEO was hyping the products. Twitter pumpers were hyping the products … and newbie traders don’t understand.

You Didn’t Miss the Boat

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The resistance to reality is crazy sometimes. Here’s another example of a recent pump.

AgEagle Aerial Systems, Inc. (NYSE: UAVS)

Check out the six-month UAVS chart…

UAVS stock chart
UAVS chart: 6-month, daily-candle, promoted stock — courtesy of StocksToTrade.com

I was tweeting about pumps and mentioned UAVS. One reply was something like this…

“Actually if you think they’re pumps you just missed the boat. You can jump in … It’s not too late.”

This person doesn’t understand how the game works. He didn’t know I was buying UAVS back on April 27 before it hit $1 per share. That was before the big spike in the middle of the chart.

Look at the chart again … All the price movement on the right is due to pumping. Some people are teasing a deal with Amazon. But whether it will happen, who knows? They’d be lucky to get it. If they do, they’ll probably screw it up or dilute the stock.

Expect the worst and you’ll never be disappointed. Don’t be blinded.

Pump vs. Pump and Dump (And I’m NOT a Lawyer)

When I say these companies are pumps, I’m NOT saying they’re doing anything illegal. There’s a difference between a pump and a ‘pump and dump.’ I’m not a lawyer, and I’m not getting into legalities.

My point is that they’re getting pumped. Whether it’s through press releases or Twitter pumpers doesn’t matter to me. All I care about is whether the stock will go up or down.

With pumps, they tend to go up for a while — when they’re getting pumped. Then they go straight down.

Why the World Hates Penny Stocks

It’s not just failing companies and sketchy promoters. It’s because too many newbie traders lose.

But why do they lose? Because they’re not prepared. It’s your responsibility to educate yourself. The BS the pumpers spread isn’t your fault. But understand that it’s up to you — from this point forward — to learn what’s really happening.

Here are two more examples…

Ideanomics Inc. (NASDAQ: IDEX) and Nikola Corporation (NASDAQ: NKLA)

One guy told me he knew someone who was in GNUS at $8. Now it’s at $2. The same person had IDEX in the $3s. It’s in the low- to mid-$1 range today.

Here’s the IDEX three-month chart:

IDEX penny stock chart
IDEX chart: 3-month, daily-candle, promoted penny stock — courtesy of StocksToTrade.com

Sadly, the same trader bought NKLA around $72. Today it’s in the high $30s. Here’s the NKLA three-month chart:

NKLA stock chart
NKLA chart: 3-month, daily-candle, pumped stock — courtesy of StocksToTrade.com

The Danger of an Engraved Mindset

With all these stocks (and MANY more) newbie traders see the price targets and hype. They’re bombarded with tweets, DMs, and messages saying…

“Don’t have the weak hand. Don’t sell like a whiny b****.” 

Those stocks were all big winners. GNUS got pumped from 30 cents all the way to $11 per share. I bought it under $1 per share. I sold too soon because I underestimated the pump. But I still profited.*

NKLA got pumped from $11 to $90. It’s still up, but too many newbie traders didn’t take profits at the highs … They bought at or near the highs. 

IDEX got pumped from 40 cents all the way up to $4 per share. Now it’s near $1.

They’re all pumps. Don’t let the promoters cloud your mindset with toxic beliefs. If you’re holding one of these stocks, hoping for it to recover, remember…

It’s Not Your Fault … They’re Lying to You

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Use the StocksToTrade social media search tool and you’ll see this from pumpers almost every day…

“If you sell, you’re weak. You have to believe.”

It’s sad. Too many people do believe, even when they have more information. I had one guy ask me about GNUS. He acknowledged all the bad but focused on the one thing he hoped would make a difference…

“I get it that there’s bad stuff about this stock. But doesn’t having a big-ticket content creator change anything going forward?”

People get so enamored with the company and hype that they fail to see the big picture.

With GNUS, the content creator doesn’t matter. Arnold Schwarzenegger getting involved doesn’t matter.

And when the stock drops 50% to 70% (or more), the promoters say…

“Of course you should’ve taken profits. I took profits.”

Sadly, when newbie traders get burned enough, they decide penny stocks are too dangerous. That’s the wrong mindset. I don’t hate promoters and you shouldn’t either. Instead, understand what they do.

Learn How the Game Works

I have so many haters it’s kinda weird. The same promoters lie about me. They think it helps their cause when they make false accusations. (I post ALL my trades on Profit.ly.) So when I call out their BS and they attack, they’re helping me. It weeds out losers who don’t want to learn the rules.

I’ll keep trading and teaching. But it’s up to YOU to learn how this game works.

My Duty: Expose the BS and Teach Strategies That Work

You know you’re constantly marketed to, right? With pumped penny stocks, marketing comes in the form of “Let’s do this together and crush the short sellers.” Or “BOXL has a deal with Samsung. What are you talking about?”

I laugh when I see those kinds of tweets or DMs. Creative Realities (NASDAQ: CREX) has a deal with Samsung, too. So what? It’s still down 60% off its pumped-up highs. I have a Samsung. It doesn’t mean the stock will stay up 100% or 200%.

Again, newbie traders mistakenly believe the stock’s up because of a contract or a product. With penny stocks, contracts and products are a smokescreen to sell stocks.

Make ‘Em Believe and Take Their Money

The pumpers want you to believe that the stock is “going to the moon.” The insiders want you to believe. “We’re building a real company. Buy and hold forever.”

They pump — with 10, 20, 50, even 100 tweets on the way up. You don’t know their position size. It’s impossible to tell if they’re buying or selling because they don’t share their actual trades.

Maybe they’re getting compensated by the company. Nobody knows. Whatever you do, don’t believe the hype. Ever. It’s the oldest trick in the book. It’s like the snake-oil salesmen wandering the American West in the late 1800s. They pitched worthless products to anyone who believed. And they made a lot of people believe.

Just like the snake-oil salesman, the pumpers sell into your ignorance. When enough unsuspecting newbie traders believe (and buy) it spikes the stock. They say, “Only the weak sell.” But what are they doing? Be careful out there. It’s a shady world.

Bluntness Cures Brainwashing

Sometimes I get asked why I’m so condescending toward students. Others say I’m blunt, harsh, or cruel.

I’ve been teaching for over a dozen years now. What I’ve learned is that newbie traders get brainwashed by the promoters. So they ignore me at first. But they remember my blunt warnings later … after they take the inevitable big losses. It’s sad what I have to do to wake people up.

But that’s my job. I know it’s unwelcome by many — that’s fine. They have to learn the hard way. I won’t sugarcoat it.

I’m brutally honest. Here’s another example. Someone claimed I was shorting…

TPT Global Tech (OTCQB: TPTW)

They have no idea what I teach. TPTW was a five-cent stock. I’ve NEVER shorted a five-cent stock — that’s terrible risk/reward.

I bought it a few times, but that doesn’t change the fact that it’s a PUMP.  Now it’s down to 3 cents a share. This guy took a screenshot of my tweet calling it a pump. He thought I’d delete it when he ‘outed’ me.

Please. TPTW was a pump with red flags all over its SEC filings. So the idiots responding to my tweets are either pumpers or uneducated.

I won’t delete that tweet. It’s the truth. Just read these companies’ SEC filings to see the red flags. Learn how to read SEC filings here.

Sadly, people don’t want to believe it’s a pump — they prefer to hope. TPT Global Tech even had to disclaim a social media pumper’s announcement about a supposed 5G deal in the UK.

For me, I had a nice profit on TPTW on July 17.* Read about that trade and day trading setups working now here. For those who didn’t take profits … the stock is down 50% off its highs.

Here’s the TPTW three-month chart.

TPTW penny stock chart
TPTW chart: 3-month, daily candle, pumped stock — courtesy of StocksToTrade.com

I like to see all these pumps go as high as possible. And I don’t care if it goes down. But I’ll NEVER believe in the company or the hype.

My Trading Principles Haven’t Changed

Most newbie traders will ignore me at first. It’s like I’m trying to wake them up from “The Matrix.” But they remember my brutal honesty after they lose 50% or 100% of their money. 

Then it’s, “I should’ve listened to Tim Sykes.”

Remember, half a decade ago I warned about pumped pot stocks. I fought several promoters and a whole community saying I was full of crap. Many lost everything. Some came back to me and said, “Wow. You saved me a lot of money.” 

Others said, “I wish I would’ve listened to you.” It’s all in this Men’s Journal article: “Buying High: How to Get Rich on Pot Stocks.” Nothing’s changed.

I also exposed Justin Bieber and Shaq as celebrities who fell prey to failing companies with paid promoters. That’s how I have to wake people up. I tried the nice approach — it didn’t work. Sometimes you gotta be cruel to be kind.

That’s two big differences between me and the promoters: blunt honesty and principles. But there’s one more — and this is critical.

I Will NEVER Abuse My Students for Short-Term Gains

It doesn’t make sense. Think it through. My success as a teacher depends on my having more successful students. So why would I do it?

I wouldn’t.

I constantly tell students to never follow alerts. Never follow anyone’s alerts. Plus, I do full commentary on my trades — entry/exit, position size, and why I bought or sold.

Promoters say, “Only the weak sell…”  They’re conning people. They’re selling into their unsuspecting newbie followers on the way up.

Also, I donate all my trading profits to charity. That way deserving charities get money and exposure … And I can prioritize students. Teaching is my priority, and I trade to teach.

Ignorance, Promoters, and Sketchy Companies

That’s a triple threat to newbie traders. But it’s up to you. YOU have to learn how this game works. The promoters and sketchy companies aren’t going anywhere. YOU have to take responsibility for the first part of the equation: Ignorance. I’ll help you, but I can’t do it for you.

Promoters will continue on … pumping stocks all over social media. It’s how they make money.

Sketchy companies will keep at it … diluting the stock into big spikes. It’s how they make money because their products and contracts are smokescreens.

But ignorance … you only get to use THAT excuse once. After that, it’s on you. You can listen to me or learn the hard way — your choice.

Here’s one trading rule you can put in place today.

For me, it’s simple: rule #1 is cut losses quickly. I can be wrong in any stock. And yes, cutting losses quickly means sometimes I get out too soon. I don’t ride the pumps as much as I could. But getting out soon protects me from big losses.

Starting today, follow rule #1. All my students featured in this NY Post article follow that rule — and have for a long time. Now they’re making $100,000 to $300,000 in the last 90 days.* But it’s not only cutting losses. You also have to learn what to do in the first place…

Educational Resources

You choose how dedicated you can be. Just remember that ALL the educational resources I offer are a fraction of what you’d lose by believing promoters. Or what you’d miss out on by actually learning how penny stocks work.

Learn how to play the game. None of the companies matter. Learn the rules so you don’t get stuck. Here’s a ton of educational resources — free or no-cost. Some require an investment. Again, you choose….

No-Cost and Free Trading Education

Low-Cost Trading Education

  • The Complete Penny Stock Course.” Written by my student Jamil, this book covers the basics of my entire strategy. Every penny stock trader should read this book.
  • How to Make Millions” DVD. Many students begin their journey here. All profits from the sale of this DVD go to charity.

Invest in Your Trading Education

  • Pennystocking Silver. This is where millionaire students Roland Wolf and Tim Grittani started.* (They both joined the Trading Challenge later.)
  • Trading Challenge. This is the most comprehensive trading education I offer. It’s everything … DVDs, video lessons, chat room, daily watchlists, and alerts. But what makes it special is the two to four live webinars every week. Fair warning: you have to apply and not everyone gets accepted.

Now you know what too many newbie traders don’t know. And you know why the world hates penny stocks. My question for you is … which of the above resources will you start with today?

What do you think of this post? Comment below, I love to hear from all my readers!

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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”