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4 Things You Must Know About the Short Squeeze Mania

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Written by Timothy Sykes
Updated 10/19/2023 7 min read

Fun fact…I hate trading short squeezes.

Why?

Because they’re super volatile and scary.

However, trading is all about adapting. I wouldn’t be in this game for over 20 years if I stuck to the same strategies as when I started.

And nothing, in my opinion, has been more profitable this year than trading short squeezes.

That said if you haven’t traded them or are thinking about starting… there are 4 essential things you must know.

Discover what they are and how they can potentially shift the odds in your favor.

#1 The Catalyst Isn’t News Driven

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Most companies that pump their stocks up via press releases experience a small pop and then a fade.

The move was so obvious that early on in my career, I would short these pumps.

However, the promoters and pumpers have been sort of low-key this year. Maybe it has to do with what’s happening to the Atlas Trading Group, but for whatever reason, we’re not seeing as many pumps as we used to.

Ironically, we’re seeing some of the biggest squeezes I’ve witnessed in my career.

All thanks to short sellers.

Many of them hang out in the same chat rooms all looking to take advantage of these horrible stocks on the downside after they’ve experienced a massive spike up.

It makes sense.

But here’s where they mess up.

First, there are way too many traders with the same idea. In other words, it’s a very crowded trade.

Second, they are often focused on stocks with relatively small floats. This becomes a supply vs. demand issue.

And because there is a limited supply of shares and everyone is trying to get them…they are getting squeezed easily.

Every time they’re covering, they’re adding to the buying pressure…causing greater squeezes.

And while short sellers are eventually right in the end…their strategy is difficult to execute from a psychological and risk management perspective.

Yes, you will be right, but can you absorb a move from $1 to $10?

Most traders can’t…

#2 Shorting Is Expensive

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Many of the stocks being squeezed are hard to borrow. In other words, short sellers have to locate shares to borrow…often for a hefty fee.

And here’s another thing.

Since buying stock is free at most major brokerage houses…there’s a ton of shady brokers now promoting they have the best locates and prices.

What’s happening is some of these brokers are over allocating shares.

Which only creates bigger and bigger squeezes.

#3 There’s A New Playbook

Tim Sykes top penny stocks list trading education September 13, 2021
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I wish I could trade the same setups as I did from when I first started. I probably wouldn’t even trade, I would have my strategies automated by now.

But trading isn’t that simple.

The markets are changing and because of that, you must also adapt.

For example, check out the chart below on TPST:

On the left of the chart, it shows last Friday’s price action. As you can see, it had a big spike up and then failed…

Moving onto the right of the chart, you’ll see Monday’s action…the stock broke above Friday’s previous highs and continued to surge.

In the past, I would advise my students to stay away from one-day runners that failed.

However, that’s not the case in this market.

That’s why you have to be open-minded…something short sellers have a hard time being.

And since there are no hard rules on these setups you’ve got to be super nimble.

You can check out how I traded TPST here and here.

As you can see, these plays can be tricky, that’s why you must always focus on your risk management.

#4 Ride The Hype…Take Profits

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One second your long stock position can be squeezing to day highs and within the same candle spike down and collapse.

Remember, we are dealing with some crappy companies here.

They’re only squeezing because of stubborn short sellers, not fundamentals.

That’s why I’m usually in these trades for just a short amount of time.

I’m aiming for quick profits…or cutting losses quickly.

They’re just trades to me…nothing more…nothing less.

Be better than the short sellers and focus on risk management.

Be grateful to them for giving us these opportunities…and lock in profits when you get them.

Dive Deep Into the Short Squeeze Phenomenon! 🚀

Monday motivation - Tim Sykes swims with laptop exemplifying mindset mastery to achieve success
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While I might hate trading short squeezes, there’s no denying they’re currently one of the most profitable strategies out there.

And let’s face it – understanding this dynamic can be the difference between a successful trade and a missed opportunity.

 

🔥 Navigate the risky waters of the current market with proven tactics.

🔥 Decode the key reasons why short squeezes are dominating and how to profit from them.

🔥 Learn how to leverage this market situation, even if it’s against your typical trading nature.

 

In our upcoming live training session, We’ll be pulling back the curtain on how my students and I have adapted to this trend and the secrets behind their success.

 

💡 Want real-time strategies that work in this volatile market?

💡 Ready to transform how you view and trade short squeezes?

💡 Eager to sidestep common pitfalls and increase your potential profits?

Unlock the Mystery of Short Squeezes with Me and My Top Students

Your Blueprint to Tackling Today’s Trading Challenges is Just a Click Away.

👉 SECURE YOUR SPOT NOW! 👈

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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”