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Trading Tips-Tim Sykes Penny Stock

Pinpoint Reversals With Precision

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

Every trader needs a bread and butter setup – something they can lean on through thick and thin.

My first million came courtesy of the Supernova pattern.

I didn’t know it then, but this incredible arrangement offered a blueprint for multiple setups on the same stock.

One of the greatest skills was learning how to buy dips.

You see, most traders focus on riding breakouts, hoping to surf a multi-day wave.

I found more success buying into panic dips, especially on stocks in a multi-day bull run.

The trick was identifying WHEN and WHERE to enter the trade.

Pinpointing key reversals is more than just knowing support levels.

It’s about watching how they interact.

This is key to minimizing drawdowns and maximizing gains.

Here’s how I do it.

Locate Big Gainers

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Many traders make money on big, slow stocks like IBM or Goldman Sachs.

I find these stocks difficult to trade for two reasons.

First, names with large floats, anything over 50 million shares, tend to chop around, making it difficult to stick with a trade.

Second, they make smaller moves than low-float penny stocks.

That means I need to drop more money into the trade to make the same profit.

Instead, I prefer stocks with low floats that make big moves.

Every morning, I run a screen with our StocksToTrade platform.

While most brokers have this, StocksToTrade offers unique filters, including share float, percentage gains, and premarket volume.

But the best part is that the screener keeps running. That saves me the hassle of going back and rerunning it every few minutes.

Some of the stocks I’ve been watching recently include:

  • Indonesia Energy Corp. Ltd. (AMEX: INDO)
  • Intelligent Living Application Group Inc. (NASDAQ: ILAG)
  • DSG Global Inc. (OTC: DSGT)
  • Genesis Electronics Group Inc. (OTC:GEGI)

These are names with good volume lately and solid runs making them ideal for dip buying opportunities.

Locating Support

For newer traders, it’s important to locate support levels before jumping into any trade.

There are three easy ways to do this:

  • Swing points
  • Consolidation areas
  • Open/Close

Take a look at how this plays out with DGST.

The thing to remember is that these are spots of possible support. It doesn’t mean they will stop a stock or even be reached.

That begs the question, how do I know WHEN to jump in?

Follow the Price Action

Let’s say a stock is coming into an important support level.

What would cause it to reverse course?

Buyers, plain and simple.

I’ve found two ways to determine whether they’re stepping up to the plate.

The first is using level 2 data. This works best with OTC stocks since there are no market makers in that market.

Identifying a wall of buyers at an important support level gives me the confidence to step in at that price.

The other method is to watch price action.

Let’s use ILAG as an example.

The support level stays around $3.50 give or take. Half dollar and whole dollar increments work great for support.

Price dropped into that support on heavy volume and then quickly reversed on equally heavy volume.

Typically, that marks a low that I can trade against, meaning use the low as a stop.

From there, I look for a bounce of 5%-10% and a quick profit.

The heavier the volume and more violent the reversal, the greater the odds that low holds.

Practice Makes Perfect

Tim Sykes holding An American Hedge Fund in Italy after creating his top penny stocks list
© Millionaire Media, LLC

Go back through the charts of Supernovas, and you’ll see this take place repeatedly.

It isn’t always easy to locate these support levels. But with enough practice, you’ll start to pick them out.

However, this is just one part of the trading process.

I teach my millionaire students to combine news catalysts from the Breaking News Team along with chart patterns to develop some of the most incredible setups.

Don’t miss your chance to shove that 9-5 grind to the curb and start trading for real.

Click here to see how.

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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 (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”