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Trading Recap

How I Protected Myself From This Market Selloff

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Written by Timothy Sykes
Updated 8/25/2023 6 min read

While most traders were locked in on Nvidia, and the sinking tech sector yesterday, I had a different plan.

No…it didn’t involve shorting the Nasdaq.

Or some other bet against stocks.

But it was just as profitable and a lot easier in my opinion.

It’s crazy to me that so many people try to make trading so difficult, trying to guess what will happen to the overall market when this option is on the table.

For example, while the QQQs were puking yesterday, I plucked out a fast winner in one of the unlikeliest stocks.

I’m about to show you how I did it.

Serious Question: Before We Get Started

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The reason why stocks like Nvidia get so much attention is because a lot of institutions own the stock. And since most people are passive investors you’ll find stocks like Nvidia, Apple, and Microsoft in a lot of retirement accounts.

But that’s not all…

Since these companies are so large and have such a huge impact on the economy…there’s an army of Wall Street analysts who follow their every move.

Now, I don’t know about you…

But why would I want to be competing against Wall Street pros who have better information, buying power, and resources than me?

I don’t…

And you probably shouldn’t either.

After all, what is your edge over them?

Instead, I prefer to compete against weaker, dumber, and overly emotional traders.

Competition I know I can beat.

Competition I have been beating for +20 years and making millions off.

You see, at the end of the day, we trade to make money.

Why would I want to make it hard on myself?

Picking Battles You Can Win

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Fundamentals matter…especially if you’re a long-term investor.

However, they rarely have a place in trading.

If you’re in a trade for a few seconds or minutes, do you think fundamentals are more important than price action and the laws of supply and demand?

Heck no.

However, that’s not how short sellers think. And this major flaw makes them extremely vulnerable.

And while it sucks for them they use broken logic…it’s an opportunity for traders like myself.

An opportunity I look to exploit daily.

Take, for example, my trade in the ticker symbol MULN yesterday.

The fundamentals of this company are horrible. And I would never invest in this stock.

However, I’m not an investor, I’m a trader.

I let price action dictate whether I get in or not…

That said, the stock was up big the previous day…going from $0.39 to $0.80.

Source: StocksToTrade

Did it deserve to be up that much, probably not.

But this game is all about supply and demand. If the buyers are more aggressive then sellers the price will rise.

And if too many shorts are in the stock…buying pressure will create a squeeze.

On Thursday, the stock opened up significantly lower…

The overaggressive shorts were probably thinking the stock was a zero.

However, I know when stocks like MULN sell off that hard, it makes sense to buy, based on risk vs. reward.

If you study the market, you’ll know that overagressive shorts are creating huge rallies in garbage stocks…creating massive short squeezes.

So I saw it as an opportunity to buy.

Source: StocksToTrade

I got in at around $0.56 and quickly peeled out near $0.60. 

It might not sound like exciting, but it was nearly a 6% move up in just a few minutes.

The crazy thing is I overestimated the move because it rallied to $.96.

Just goes to show how wrong the shorts were in the morning.

And I’m seeing plays like this occur a lot in this market.

Here’s what to pay attention to:

  • Look for fundamentally weak companies with strong stock price action
  • I don’t look at short interest or anything like that but I look at how a stock trades, sometimes for weeks, this will eventually give a feel on whether shorts or in the stock and when they are getting squeezed
  • Pay attention to stocks that are trading above average trading volume and avoid thinner volume trades

Are You Ready To Level Up?

The strategies I teach my students aren’t conventional. But as you can see, they can be very effective.

If most people who trade lose money would you want to trade the same way they do?

Of course not.

To give you a better understanding of what I mean, I’ve told my team to start putting together live training sessions. 

They are absolutely free for you to attend.

CLICK HERE TO GET ALL THE DETAILS. 


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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”