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Mentor Updates

Why It’s Crucial to Know Stock Market History

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Written by Timothy Sykes
Updated 4/17/2022 15 min read

With all the recent volatility, it’s crucial to know your stock market history. The big market plunge last week wasn’t really unexpected. But the amount of opportunity surprised a lot of newbies.

People have misconceptions about market crashes. I’ll get into some of those in this edition of the update — along with why you MUST study stock market history.

But first, a travel update…

Unveiling the First Karmagawa School Bus

In the U.S. we take basic education for granted. Sadly, there are places in the world where kids don’t have the same access to education. In the last update, I told you about the new school openings in Bali. Karmagawa works closely with Bali Children’s Project so more kids can go to school.

We’re up to 70 schools and libraries worldwide, including 20 funded projects in Bali. But in some of the villages, the kids have to walk up to four miles to school. The roads are very narrow — so if it’s raining they just don’t go. That’s a problem. So we decided to take action.

I’m very proud to announce the unveiling of the first Karmagawa-sponsored bus. It’s the first of many.

 

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PART 3/3 The final day of our visit from supporters @karmagawa was a very special unveiling to celebrate our TWENTIETH project with Karmagawa funding. We headed back to Selulung village which already has the @bazzi learning centre, next to the Herbert Learning Centre. The village still had problems though as the houses are so spread out, meaning many kids had to walk to school in the rain. Some students walk 5km to just get to school, getting up early and walking for hours. Rain or shine, they would have to do this. And in the mountains of Bali it rains. A lot. When it rains many students don’t bother going to school. The village held a massive welcome ceremony to celebrate the first ever school bus for the area. It means children have easier access to school and never need to worry about walking long distances again. Our founder Linda @nybali presented the keys to the community while @adamw helped to unveil the new school bus. It’s been a wonderful journey for Bali Children’s Project and we are in awe of the support we’ve received to deliver these projects. We are so proud to say that the best is yet to come as we now how more funding for more projects in rural Bali. If you’d like to support our work, there are so many other areas in need. Please get in touch if you can help us.

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When Mat Abad and I started Karmagawa, we talked a lot about how important education was in our lives. We decided education is a huge priority for Karmagawa. These buses give kids easier access to school. They’ll never need to worry about walking long distances to get there again.

Update on Our Mission to Save Animals in Australia

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We’re still talking with a bunch of different charities. As I wrote last week, it’s a complex issue. I wish it were simpler. It’s not. With a lot of the charities, the money doesn’t go to just helping animals.

When we were in Australia, we met with sanctuary after sanctuary. They’re not getting the money they need to help many animals.

I wish I could donate directly to these small sanctuaries. Unfortunately, they’re not set up as normal charities. So we’re searching for a mother charity that can (and will) give money to these small sanctuaries that need it.

We’ll know more soon and I’ll update you here.

Let’s get to trading and why you need to study stock market history. We’ll jump right into student questions this week…

Trading Questions from Students

The first question in this edition is a great example of why knowing stock market history can save you a lot of pain. Check it out…

“Does fear in the markets create safer opportunities for short sellers?”

You would think that’s the case. Here’s the problem …

These short squeezes have gone on much more than in the past. Again, study stock market history.

Here are two prime examples…

Alpha Pro Tech, Ltd. (NYSE: APT)

I mentioned APT in my recent post about the stock market crash. The company makes medical masks. There’s a huge demand for masks as the coronavirus spreads around the world.

During the Ebola outbreak of 2014, APT went from $3 to $12. Now — during the coronavirus scare — the stock went from $3 to $41. So it’s roughly three to four times more than the previous spike.

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Short sellers think it’s easier, but it’s a trap. It’s even more dangerous than ever. I know many short sellers blew up on APT.

Here’s another example…

Allied Healthcare Products Inc. (NASDAQ: AHPI)

Again, study stock market history. AHPI spiked in October 2014 during the Ebola outbreak. Its biggest single-day move was 78% on October 9, 2014.

Take a look at the AHPI 10-year chart…

AHPI chart perfect example of why you need to know stock market history
APHI chart: 10-year, compare Ebola spike to COVID-19 supernova — courtesy of StocksToTrade.com

Now look to the right on the chart. This time, with coronavirus, it went much further. But that chart still doesn’t tell the whole story because you can’t see extended-hours trading.

Here’s the APHI five-day chart…

APHI chart: supernova a repeat of stock market history?
APHI chart: 5-day, COVID-19 supernova — courtesy of StocksToTrade.com

APHI went from $4.15 to $66.99 in less than 24 hours. That’s sixteen times your money or 1,614%. It’s another example of a short-squeeze supernova.

In case you’re wondering how I know it was a short squeeze…

Short sellers are a lot like vegans. You don’t have to ask — they tell you.

Since short interest data is delayed it’s never very accurate. So I use StocksToTrade’s social media search tool to get an idea who’s doing what. I recommend it. It’s almost like a secret weapon.

Remember — it’s not an exact science. But when you study stock market history, you know what clues to look for.

Next question…

“Could the coronavirus cause forced selling from institutional investors due to client redemptions?”

It’s hard to say. It’s just a panic at this point. We don’t know how bad it’s gonna be for the world economy.

If you’re new to penny stock trading, this question might raise more questions…

First, what’s forced selling? It’s just what it sounds like. An investor gets forced into selling off assets. It usually happens due to some kind of big or unforeseen event.

Next, what’s forced selling by institutional investors? I talk about it very briefly in my TimRAW guide. When the stock market goes down enough, people get scared. Institutional investors get hit by client redemptions.

Clients invested in mutual or hedge funds want out. So they redeem their shares. These client redemptions can force the fund managers to sell off their positions.

So when stock prices are already low and big sellers come into the market, prices drop more. It creates a kind of downward spiral.

Come back to the present — again we just don’t know.

Both Tesla and Apple warned that the coronavirus will affect operations. Some of these companies won’t have the demand they’re used to. Especially in the Chinese economy. Also, Chinese manufacturing is off for many weeks.

Frankly, it surprised me the markets held up so well. Then, on Friday, I was surprised by the big bounce running into the close.

It looked like some sort of buying program designed to get everyone all excited. For me, I didn’t go long over the weekend. This is scary stuff right now.

New to penny stocks? Get my FREE penny stock guide here.

Let’s finish up with the…

Trading Lesson of the Week: Know Your Stock Market History

Last week I made $2,785. Jack Kellogg made roughly $29,000 on the week. Tim Lento made around $26,000 on Friday. Mark Croock made roughly $30,000 on Thursday and Friday.**

[**Please note these results are not typical. These traders have exceptional knowledge and skills that they’ve developed with time and dedication. Most traders lose money. Trading is risky. Do your due diligence and never risk more than you can afford.]

Then there’s Tim Grittani. He celebrated his birthday last week. And he made somewhere around $160,000 in one day.** I don’t know the exact number, but I think he made a quarter-million last week. We’ll find out when he posts his trades on Profit.ly.

Speaking of Grittani, check this out…

Announcing The Biggest Penny Stock Milestone Ever!

OK, back to stock market history. My point is…

I don’t throw out those numbers to brag. There are just so many students to congratulate. SO many students had a huge week. It was almost fire at will.

But to do it, they had to know stock market history.

You should know your stock market history, right?  

If you’re gonna trade coronavirus-related stocks, you should study previous outbreaks. Even if they’re not as big.

Stock Market History Repeats Itself

Looking back at when the Ebola outbreak happened — it’s the same exact stocks. This outbreak is just bigger. At least study stock market history so you can have some kind of framework.

Also, I keep getting DMs from non-students and students alike saying…

“I’ve never seen anything like this.”

Yes, you have. You just haven’t watched my DVDs or video lessons enough. Study harder.

Millionaire Mentor Market Wrap

We don’t know what’s gonna happen with this market. Today the market’s trying hard to rally. And while we know the coronavirus will affect the world economy, it’s not clear how much. But I can tell you one thing…

My top students — those who are crushing it on virus plays — all studied stock market history. Or they were there the last time these plays were hot. Either way, a knowledge of stock market history is part of their skill set.

Wherever you are on your journey — whether trading or still learning — pay attention to what’s going on. Then do yourself a favor and go watch all my DVDs and video lessons.

Some people want to know which DVDs or video lessons are the most important. They’re all important. This market is a perfect example of why. Watch every single one. More than once.

Trading Challenge

All my top students are part of the Trading Challenge. The program includes access to over 6,000 video lessons, hundreds of hours of DVDs, and weekly webinars. Plus, you get access to all archived webinars — thousands of hours of stock market history as it happened.

Fair warning: not everyone who applies gets accepted. The Trading Challenge requires an incredible amount of dedication. Think you have what it takes? Apply here.

Congrats to Students Learning AND Profiting**

There are so many students to congratulate I’m planning an entire post dedicated to it. For now, here are only a few of the trades reported in chat last Friday.

[**Please note these results are not typical. These traders have exceptional knowledge and skills that they’ve developed with time and dedication. Most traders lose money. Trading is risky. Do your due diligence and never risk more than you can afford.]

Comments From Trading Challenge Chat February 28

10:56 AM craz4sure: Started the challenge on the 14th. Up almost $900 since then. My friends keep telling me they miss me because I’m studying all the time. 🙂

12:01 PM markcroock: +10k on VXRT.

12:04 PM PJCraddock: $2.43-$3.04 on $IBIO. Emotions have been killing me since a big (for me) loss about  2 months ago. My biggest gain since Oct. $535.

12:04 PM markcroock: all out everything +16k.

12:09 PM Jackaroo: covered $APT +$5k up $9000 realized 💪

12:46 PM Androo: best day ever, up $1.9k ! I think Imma call it and get back to my job so I get it done on time lol

01:50 PM MikeySaghbini: im up around $1200 on the day.

02:11 PM Mk12: $APT- quick in and out for $500 profit… total for the day $6500

02:17 PM kylecw2: the most predictable moves for these virus plays are over imo. Who knows what happens news wise over the weekend. Closing today roughly $5k and $18k for the month.

02:38 PM GoodNeighbor143: up $542 on my $3500 paper trading account with STT goood week of learning.

02:54 PM wildwes: $BIOC quick 10% from .49 to .54 on the breakout.

03:16 PM craz4sure → DevineMofo: I took gains of $725 this week (on $1k account) buying and holding overnight… I’m not opposed to doing that again next week.

What do you think about studying stock market history? Comment below, I want to hear from you!


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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”