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The Smart Way to Grow Your Small Account

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Written by Timothy Sykes
Updated 5/18/2022 6 min read

Hey trader. Tim here.

It’s been almost 30 years since my parents let me take $10,000 in Bar Mitzvah money to jump-start my trading career.

I didn’t become a millionaire overnight. Not by a long stretch.

In fact, the market beat me up plenty as I clawed my way to the top.

Today, I’m still amazed to look at all of the things I’ve achieved from that small account.

When I began my mentorship program, I wanted my students to reach those same heights.

And This Friday’s LIVE Mastery Class takes that to a whole new level!

But I knew that wouldn’t happen unless I could teach them how to take a small account and turn it into a wealth-generating machine.

Over the years I created small account challenges for myself — comparing the trades, strategies, and risk management to larger accounts.

It turns out they’re more alike than you might think.

Plus, one of the biggest drawbacks, the pattern day trading restriction (PDT) can actually be an advantage.

But I don’t want anyone to think that it’s easy to take $100 and turn it into $1 million.

However, ANYONE can break through the market to become a successful trader, even folks with small accounts.

For years, high broker commissions and fees ate away at my profits.

But now that equities mostly trade commission-free, there are only a few things I need to successfully grow a small account.

Make Friends with the PDT Rule

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By far, the number one complaint I hear with small accounts is the limitation imposed by the pattern day trading rule (PDT).

Let me explain for those not familiar with this rule. After the advent of online trading in the late ‘90s and the bubble bonanza with dot-com stocks, the SEC implemented the PDT rule in February 2001.

The rule says that margin accounts containing less than $25,000 could only take three round-trip trades within five business days.

You can learn more about the specifics from my recent blog post.

In that article, I touch on the idea I’m about to tell you…

Stick with three round-trip trades per week.

Don’t try to game the system or find a loophole through an offshore broker.

Just stay with the three trades per week restriction.

One of the most common mistakes any trader makes is overtrading.

We get a hot hand, revenge trade, or simply get caught up in the momentum. Ultimately, we enter less-than-ideal setups (or take on too much risk).

Imagine if I laid out 50 trades for you to choose from each week. If you could only pick three, which would you choose?

For my money, I’d go for setups with higher probability — or a nice risk/reward ratio — to help grow my account faster.

When I limit myself to only a few trades, I instantly zero in on the best ones out there. That doesn’t mean they work every time. But I can say with full confidence that I’m giving myself the best shot at success.

Treat It the Same as a Large Account

Tim Sykes checks his penny stock positions from Tulum
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If you can’t make money with a $5,000 account … you have no business trading a $50,000 account.

It’s that simple.

I don’t look at risk and reward in total dollar terms. Instead, I view it as a percentage of the account.

Here’s an example…

Let’s say I take a trade where I risk 2% of my total account value to make 5%.

For a $5,000 account, that means I could lose $100. For a $50,000 account, I could lose $1,000.

The dollar amount isn’t important. What matters is the percentage of my account that I put on the line.

Penny stock trading isn’t like buying and selling Alphabet Inc. (NASDAQ: GOOG) or Amazon.com, Inc. (NASDAQ: AMZN), where you might only be able to buy one or two shares.

With penny stocks, you can potentially buy hundreds of shares, giving you the flexibility to scale in and out of the position.

This brings me to my final point…

Take Many Small Trades

Tim Sykes giving top tested trading tip from Venice, Italy 2021
© Millionaire Media, LLC

You never want any single trade to blow up your account.

I constantly tell my students to take small, fast losses.

Over the years, I watched far too many traders get cocky and push their chips in … only to watch the trade decimate their P&L.

Most successful traders earn their profits over the long haul.

Only a few make large, well-timed bets. Good for them … but that’s not something I can teach.

I want my students to create consistent streams of income through trading.

And the only way to do that is with a repeatable, mechanical process.

Trading should become so ingrained that the actions become second nature.

Sure, you might make a few trades each year that pay out HUGE. That’s actually pretty common.

But make sure that when you trade with a small account (same as a large one), you give yourself space so that no one trade (or string of trades) can break you.

With that in mind, I’d like to invite you to come check out one of my absolute favorite patterns for small account traders.

This is the same pattern I used to help me turn that $10,000 account into more than $7 million.

Click here to learn more about my Supernova 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”