timothy sykes logo

Penny Stocks News

Simple Trades Lead to Massive Gains

Updated 7/6/2022 5 min read

Yesterday, I highlighted an epic trade that several of my millionaire students dominated for close to $1 million in combined profits.

No question, everyone wants sick results like Jack Kellogg’s $377,795+!

Yet, I wouldn’t suggest that type of trade for folks new to the game.

Some trades are easier than others.

But you can do incredibly well with just a few, well-placed trades on simple setups.

The setup I used for last Friday’s trade was one of the easiest in my library.

Some people look at my win and think,

 

Tim, why don’t you try and go for more?

Traders that ask this question miss an important statistic from my account…

I’m up more than $80,000 this year!

Taking obvious, easy trades where I keep my losses small netted me a healthy profit this year.

This is how I start with all the traders who join my millionaire challenge.

And I want to show you how just a few key setups can transform your profitability.

Click here to continue reading

 

Basic Math

I’m going to make a bold claim…

$1 million in profits is achievable with just 3 trades a week and a small account.

Don’t take my word for it.

Here’s the math behind it.

According to my stats, I win about 77% of my trades. But let’s say I win roughly 66% or two out of every three trades.

Now, let’s assume I risk $100 to make $100 on every trade with a $5,000 account, or 2%.

This first week would go something like this…

Win $100 + Win $100 – Lose $100 = $100.

This would be reasonable if I were restricted by pattern day trading.

Now, assume I keep at it, risking 2% on every trade.

With each trade, I’d gain roughly 0.667% of my account on average.

Starting with $5,000, it would take me 797 trades to turn $5,000 into $1,000,000.

At three trades per week, that would take 266 weeks or about 5 years.

That might sound like a long time. But, I know plenty of traders who have struggled for more than a decade to turn a profit.

For them, this would be incredible.

But I also want you to keep in mind that this is a very conservative take.

Ideally, I want a position that pays out more than I risk.

If instead of risking $1 to make $1 I risked $1 to make $3, I would only need 161 trades to get to $1 million, or one year at three trades per week.

I’m not saying this is easy. 

Jack Kellogg actually lost a few thousand dollars his first year trading.

But he kept at it and slowly but surely became consistently profitable.

Find Your Bread & Butter

At the end of the day, there are probably less than a dozen setups I trade.

I like to think about my trades as chapters in a book.

Each trade has its basic components.

From there, I add or subtract information that helps or hurts me.

On Friday, I bought a short pullback on the one-minute chart in a strong uptrend with a squeeze setup and a coming holiday.

It’s like baking a cake.

The pullback buy is the base. The squeeze setup is an additional layer with the holiday timing as the icing.

For the mathematically inclined, assume your base setup works out 60% of the time.

Each advantage you add to that increases the win rate by 5% (hypothetically).

Now, buying into strength like that isn’t always a good strategy.

If that same stock hadn’t dropped like a rock, instead closing lower day after day in a slow bleed, I’d be more inclined to use my morning panic dip buy.

But in this case, buying a small pullback into strength made sense.

Use your trading journal to categorize the trades you take.

From there, identify the ones that you execute consistently and turn a profit.

Focus on just those and making them even better.

Once you can consistently turn a profit on that small subset, then you branch out.

Even just one great trade per week can do wonders.

That’s why the discovery of my Supernova pattern was so enlightening.

Once you understand its mechanics, this pattern offers so many different ways to trade the same stock.

And this pattern repeats over and over.

If you aren’t familiar with it, I highly recommend you check it out here.

—Tim


How much has this post helped you?


Leave a reply


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

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

* 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 (205) 851-0506 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”