timothy sykes logo

Watchlists-Penny Stock Investment Strategy

Pick These Stocks For Your Small Account

Timothy SykesAvatar
Written by Timothy Sykes
Updated 9/4/2022 5 min read

While my trading techniques can work for anyone, they do especially well with small accounts

Take Mariana, for instance.

Back in December 2020, she became my first six-figure female student.

She joined my millionaire challenge shortly after high school a few years ago.

Like many of my challenge students, Mariana started with a small account.

Today, she is one of my top millionaire students, passing on the knowledge to others.

Small accounts are nothing to be ashamed of. Everyone has to start somewhere.

The problem most traders run into is they pick the wrong stocks at the wrong time.

They either grab a stock that goes nowhere or buy near the highs right before shares plunge.

Let me show you a different method to identify juicy stocks and select setups that maximize a small account’s potential in ways you never thought possible.

What’s Moving & Shaking

© Millionaire Media, LLC

Every morning I do two things.

First, I run a scan using our StocksToTrade platform.

What I love about this particular screening software is that it allows me to narrow my search beyond the basics of high volume and low price.

I can also add in things like:

  • Share float
  • Premarket change
  • # of trades
  • VWAP and other useful indicators.

Plus, I can keep the screener up and running all morning so that it populates new results as they happen in real-time.

The second thing I do is turn to our Breaking News Chat Room on the StocksToTrade Platform.

Of all the tools I use, this is the single best one for finding potential plays as they’re happening.

You see, our Break News Room is run by two incredible analysts who sift through the headlines and only deliver the ones traders want to see. Plus, they offer important context as well as keep a pulse on social media and popular chat rooms.

These two tools help me quickly identify stocks with positive news catalysts and the potential for big moves.

Ideally, I want to see a stock moving +30% in premarket. The bigger the move the better.

Picking My Spots

tim sykes and kyle williams on laptops
© Millionaire Media, LLC

One of the easiest ways to cut risk is to give yourself something to trade against.

Let’s say I find a $0.10 OTC stock opening at $0.15. Shares immediately run higher to $0.25 before pulling back.

If I want to take a long position, there are two options: buy into the trend and hope it continues or wait for a pullback and buy for a reversal.

I like the second option for small accounts and here’s why.

Take that $0.10 OTC stock that ran to $0.25 and begins to pull back.

At that point I have three key prices:

  • Prior day’s close of $0.10
  • Current day’s open of $0.15
  • Current day’s high of $0.25

If I’m buying a stock up 50% from the previous day, I don’t want to see it drop below the day’s low.

So, the range I would work with is $0.15 to $0.25.

Here’s an obvious truth.

The closer I can get my entry to $0.15, the lower my risk and the higher my possible reward.

Say I expect any bounce only to make it back to $0.20.

Buying at any price below $0.175 gives me a greater potential reward than risk.

However, that’s a conservative view of the trade.

I choose to trade big movers because they can run for huge gains.

Take a look at this chart of Nuvus Gro Corp. (OTC: NUVG).

The dotted green line shows the prior day’s close.

I drew two white lines around the opening low and high and an arrow to identify my entry.

Although it’s not huge, I bought this stock on a small dip at $0.14.

With the way I trade, I would cut the position if shares didn’t start moving higher quickly.

Most of the time, that means I would only lose a small amount, if anything at all.

But let’s say I wanted to use a stop level. I don’t have to use the entire opening range.

The bottom of the prior dip works just fine around $0.10.

That might seem like a lot. However, the high of the day was $0.20. So, I had more upside potential than risk, even being conservative.

And as you can see, trades like these have the potential for serious runs that can lead to incredible profits.

The Bottom Line

The key to growing any small account is taking smart risks.

Find the right stocks with the right setups that offer as little risk and as much reward as possible.


How much has this post helped you?

Leave a reply

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

* 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”