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A Huge Problem Vexing Most Traders Today…Solved

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Written by Timothy Sykes
Updated 2/13/2023 5 min read

Many Traders Fail Because They Miss The Big Picture

Most newbie traders fail to see the big picture. They’re often focused on one or two elements and forget the rest.

For example, 3 out of 4 stocks tend to follow the overall market’s direction. Now, you might be thinking, Tim, I stick to stocks with catalysts, or I generally trade penny stocks. What does the overall market have to do with my trading?

Well, let’s look back at last January. The Nasdaq was absolutely on fire. Not surprisingly, there were a ton more plays with penny stocks.

And after a huge runup in the Nasdaq, we’re starting to see some selling pressure. Coincidently, we’re not seeing the same type of follow-through in penny stocks, and the price action has gotten notably choppier.

Jack Kellogg joined the Millionaire Challenge and is one of my successful students, racking up 8-figures in trading profits in just a few short years.  

My student Jack Kellogg recognizes the shift we’ve seen and is now trading smaller and looking to quicker profits vs. holding for home runs.

Yes, he focuses on stocks with catalysts, but he’s aware that the overall market can influence small-caps.

If the overall market is weak and the price action is choppy, then you likely need a very strong catalyst for a stock to buck the trend. 

That’s why I’m currently taking smaller positions, cutting losses quickly, and trading like a coward.

Many newbie traders go into the day thinking every day is the same.

It’s not.

Some market conditions are harder to trade than others. But if you don’t recognize that and make the adjustment, you’ll get chopped up and take losses when you shouldn’t be trading.

You need to take a hint from what the market is telling you.

I’m not one of those guys who loves trading all day. However, if you stick me in front of a computer screen all day, I will trade, for better or worse…usually worse.

The reality is…great opportunities aren’t available each day. And if you stay in front of your screen trying to trade…you’ll like take subpar setups.

There are just not that many great setups right now.

Instead of taking crappy setups, use this time to study patterns and catalysts and review your trading plan.

Trading all day may seem cool at first…but it’s not. Eventually, you become a slave to the screens. And that’s only if you’re good at it. Most people aren’t, and they end up overtrading, losing a bunch of money, and giving up.

A Checklist To Get Your Mind Right

timothy sykes in matera in 2022
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  • The first thing you want to do is get a pulse of the market. How has it been performing, and what is the overall sentiment among traders?
  • If the market is weak, ask yourself, is the stock I’m trading have a strong enough catalyst to buck the trend?
  • If the market is strong, ask yourself if you should be getting more aggressive with your trades.
  • If you’re themed catalysts, ask yourself, where are we in the cycle? A news headline related to AI a few weeks ago will hit differently than one today. That’s because we’re later in the cycle.
  • During tougher trading periods, you must focus on discipline and patience. To better do that, you should outline what your best setups are. Do you know what your best setups to trade are? You can trade a subpar setup perfectly and not make much. But you can trade a perfect setup and mess it up and still make out well.

Bottom Line

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Trading right now has gotten a lot harder. Some of the spikers I like to trade have choppy price action. That’s why I’m trading less and being more patient. Trading more does not equal more profits. In fact, overtrading can hinder your progress severely.

Two types of catalysts I’m watching for are heavily shorted stocks for potential squeeze plays and stocks being pumped by promoters. I’ll take trades in them if my setup is there.

Before making your trades, don’t forget to get a big-picture view of the market.

And if you’re looking for more trading ideas and tools to improve your entries and exits, then I suggest you sign up for Master Algo LIVE

It’s an ALL-DAY live trading workshop that starts on Friday, February 17th, 2023.

Signing up doesn’t cost a thing, but you must register if you want to attend.

Click here for all the details. 

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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”