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Trading Recap

Why I Bought This Stock Right Before it Nearly Doubled

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Written by Timothy Sykes
Updated 11/27/2023 6 min read

Traders obsess over timing their trades to the tick, often missing them entirely.

They don’t realize it’s not about picking the perfect price but the best stock for a short squeeze.

That’s how I’ve pulled multiple winning trades out of Safety Shot (NASDAQ: SHOT)

…And how I caught Biodexa Pharmaceuticals (NASDAQ: BDRX) right before it nearly doubled.

To the outside observer, this might seem like a fluke

But if you stick with me, I’m going to unveil how I decided BDRX was the ideal short-squeeze stock and how I traded it.

Identifying the Opportunity

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The single greatest investment you can make in your trading career – a quality news service.

And for my money, there’s no one better than our StocksToTrade Breaking News Chat. This team of dedicated analysts comb through the news, highlighting the stocks moving and the catalysts behind them.

Penny stocks live and die by the news that drives them. However, it’s important to understand which news is worth trading.

A bit after 9:00 a.m., our Breaking news highlighted the following headline:

Biodexa Enters Into Agreements to Acquire Exclusive Worldwide License to Tolimidone, a Phase II Ready Asset for Type 1 Diabetes.

If you’ve been following the news, you know that diabetes treatments are gaining popularity ever since Ozempic turned out to be a decent weight loss drug.

This stock also carried a small float, just shy of 700,000 shares.

Anything with less than a million shares available for active trading can be manipulated much easier by price action.

So, what I wanted to see was short sellers get trapped.

Watching the Price Action

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The initial push higher was all momentum, following along my 7-Step Penny Stock Framework.

I waited for the pullback that offered me a chance to buy the stock in the uptrend but at a discount.

Was there a pullback before then? Yes. However, I was still analyzing the stock and the news catalyst.

I took the setup in the premarket, which isn’t the easiest thing to do. A similar setup would have been to buy on the pullback during the initial morning panic.

As I mentioned earlier, it’s not so much about timing the perfect entry as applying the right pattern to the framework.

This stock was on the front side of its potential parabolic move.

That makes dip buying the right choice for me.

If you want an indicator to help you, VWAP is always a popular choice.

However you choose to identify your entries, make it a methodical and repeatable process. Log the trades in your journal and you’ll find out pretty quickly what’s the best tactic for you.

Seeing the Short Squeeze

Looking at the chart below, can you see where the short squeeze occurred?

It’s right after that initial morning dip.

Notice how the volume increased as shares recovered and ran higher right into that first volatility halt.

Some traders prefer to wait to see this type of price action before jumping into the trade. That’s fine so long as you practice this method, log it, and refine it.

What you don’t want to do is end up like the short sellers, entering a trade thinking you’re getting a great risk/reward when all you’re doing is catching a falling (or, in their case, rising) knife.

I want to emphasize this point because risk management is the glue that holds everything together.

If you are letting stocks run too far instead of cutting losses quickly or chasing an entry because you don’t want to get left behind, that’s when you need to focus on executing according to your plan.

But again, it’s not about the specific prices you get. It’s about whether you make the right decisions.

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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

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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 (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”