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Trading Tips-Tim Sykes Penny Stock

3 Ways To Play The Market Bounce

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Written by Timothy Sykes
Updated 6/14/2022 5 min read

People thought I’d lost my mind when I called for a crash last November. No one wanted to believe the epic run would end.

Seven months later, here we are hundreds of points lower.

The talking heads on CNBC tell you to hold onto crashing stocks.

Don’t get blinded by their fancy suits. They’re most likely fancy promoters pumping up their positions.

Of course, a market sell-off is bad for stocks and the economy. So being right on the crash, is not something I am happy about.

But when I see parabolic moves creating bubbles, I have to call them out, regardless of who’s behind them.

The good news is that I’m starting to see a lot of signs we’re nearing a bottom in the short term.

And that’s opening up HUGE opportunities for traders.

Rather than catch a falling knife, I want to show you how to play market bounces in a way that minimizes risk and maximizes potential gains.

Believe it or not, I’m starting to eyeball big names like Cathie Woods’ Ark Innovation ETF (ARCX: ARKK) and Berkshire Hathaway Inc. Class B (NYSE: BRK.B).

But I don’t want to step in without taking these three precautions.

Look For Volume to Confirm Reversals

One of my favorite setups right now is the morning panic dip buy.

Essentially, I wait for a stock to drop and then watch the price action to see when promoters and other traders are jumping in to keep shares afloat.

The other day, I showed what this looked like in WikiSoft Corp. (OTC: WSFT).

This may be a one-minute chart on an OTC stock, but it applies to any other chart.

Take a look at the SPDR S&P 500 ETF Trust (ARCX: SPY) daily chart below.

Other than there being no premarket and open, this could be a penny stock chart.

Just like WSFT, the SPY found a low when volume increased and price action reversed the trend.

When I talk about ‘staying safe’ I mean waiting until there’s a clear opportunity.

Yes, I want to sell into strength and buy into weakness. But that’s only half of the equation.

The other half is to have a plan that uses price action to identify a potential bottom.

Keep Risk Small

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It’s no secret that I teach my students to lose small and fast.

In fact, I’ve got my trading so dialed in that I often manage to take small winners that might otherwise be losers.

Managing risk comes down to just two things:

  • Distance to your stop
  • Position size

With every entry, I want to enter a position as close to my stop as possible while giving the trade enough room to play itself out.

That’s why some of my trades go in at $0.067 and out at $0.066 for a loss.

On the flip side, the bounces out of these bottoms should create far more profit potential than I risk.

And with this market’s volatility, I can expect bigger price swings than normal.

Because of that, I want to reduce my position size accordingly.

Especially when I’m testing a bottom, there’s no reason to take a huge position and risk getting the rug pulled out from under me.

As markets return to normal and more opportunities present themselves, I can increase my risk over time.

Look for Confirmation

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In 2020, when the market bottomed, it was only a few stocks at first like Amazon.com Inc. (NASDAQ: AMZN).

It wasn’t until several months later that the rest of the market really began to pick up steam.

And that’s when all the preparation my students did paid off.

The next year and a half was incredible trading for penny stocks and swing traders.

But I learned the hard way that markets like to fake out traders.

So, before I get super bullish on anything, I like to see confirmation that markets have indeed found a bottom.

I’m talking about getting beaten down sectors moving higher along with completely unrelated industries like oil and biotech.

Most folks refer to this as market breadth. The idea is that a bull market moves all stocks, save for maybe a few outliers.

The Bottom Line

Markets can and often do stretch well beyond what most people think.

I’ve never found it useful or profitable to step in front of one in a violent decline.

There are plenty of opportunities out there. You just have to know where to look.

And I plan to take that to the next level with Operation Overseer.

This is going to be HUGE!

— Tim

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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”