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Short Selling- Tim's Trading Challenge

Short Squeezes Start Here

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Written by Timothy Sykes
Updated 7/14/2022 5 min read

Take a look at the chart below and tell me what you see…

I earned my first $1 million trading this exact pattern.

In fact, this pattern is so powerful that within the last few weeks, four of my millionaire students made almost $1 million combined in one stock within a matter of days.

And if you know how to identify them they could potentially mean huge profits for you.

How do you spot these career-making trades?

Short Float %

Many traders look at the short float percentage as a way to gauge the potential for a short squeeze.

At its core, the short float percentage tells you the proportion of shares sold short to the total shares available to trade.

For example, if there are 10,000,000 shares to trade (float) and 1,000,000 of them are sold short, you have a 10% short float.

Floatchecker.com is a great resource to look up this information. The site lists the float, short percentage of float, and outstanding shares from several sources.

However, if you look at the information above for Tough Built Industries (NASDAQ: TBLT), you’ll immediately see a problem.

While most of the sites have similar outstanding shares, the other numbers vary wildly.

This is caused by definitional problems and calculations.

To start with, most sites should get the outstanding shares correct. That’s the number of shares that currently exist.

The float is the amount available to trade, excluding shares closely held by insiders and board members. It’s more indicative of what publicly trades.

Most places will have the same value for the float.

The short percentage of float gets tricky.

Short interest is reported roughly every two weeks. From there, sites may try to calculate the current short float based on transactions or other methods.

I find that it’s best to take the information with a grain of salt.

With TBLT, it’s safe to say that there are a ton of traders short the stock.

Larger cap companies will tend to have numbers closer to one another.

Now, you may be wondering how it’s possible for more shares to be shorted than are available for trading.

That comes down to leverage and borrowing. Brokers will allow for traders to sell shares without actually owning them, known as a ‘naked’ short sale.

Additionally, the time between the transaction and settlement date can also cause discrepancies.

The best way to think about it, if all the sites say the short interest percentage is high, it’s probably high.

Now, let me show you a different way to think about short interest.

Look For Massive Flops

Take a look at the chart below for Lytus Technologies Holdings Ptv Ltd (NASDAQ: LYT).

This is the stock that helped Jack Kellogg, Tim Lento, Jack Schwartz, and Kyle Williams all harvest huge profits on the short side when it crashed.

But they weren’t the only ones.

Whenever a stock gets a huge selloff, quickly or over time, you start to see short sellers pile up.

Keep in mind, there’s a limit to this as short selling below $5.00 carries different margin requirements, and most folks simply won’t short stocks below $1.00.

Nonetheless, these former runners that crashed offer up some sweet bounces.

In fact, that’s exactly how I found my setup in TDH Holdings Inc. (NASDAQ: PETZ).

The stock was a former runner that recently saw interest as news hit after hours on Tuesday that the company was cancelling a share offering.

With the shorts getting squeezed in the after hours, I used the early morning strength the next day to enter my trade, actually cutting it off early before the real squeeze happened.

Even the pullback from the prior day’s after hours run created the potential for a short squeeze if buyers would step up to the plate.

While it got a decent pop in the morning, the real squeeze came on heavy volume at the end of the day.

Final Thoughts

Practice looking for setups like these where shorts build up. Then watch and see how, where, and when they get pushed out of their positions.

A great place to start is by identifying my #1 pattern.



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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”