timothy sykes logo

Trading Tips-Tim Sykes Penny Stock

Penny Stock Trading Basics: Learn the Sykes Sliding Scale

Timothy SykesAvatar
Written by Timothy Sykes
Updated 4/18/2023 11 min read

Learn the Sykes Sliding Scale: Key Takeaways

  • The Sykes Sliding Scale distills years of experience into a simple strategy to pre-grade trades.
  • It can help you avoid making stupid mistakes and modulate position size.
  • The Sykes Sliding Scale takes your personal schedule into consideration. That’s key for new traders.

Watch the Original “Trader Checklist” Guide for FREE

The Sykes Sliding Scale has seven indicators. The number of questions I get from students focused on one indicator is crazy. You can’t focus on only one aspect of trading and expect to do well. Even if you win on several trades, you’ll learn the wrong lessons. In the end, it will come back to haunt you. Here’s a thorough approach to every single trade…

What Is the Sykes Sliding Scale?

Tim Sykes checking his top penny stocks list in Italy
© Millionaire Media, LLC

When I started teaching, I needed a simple explanation for my trading thought process.

  • Why do I choose a stock?
  • What’s the pattern?
  • And how do I determine position size?

You must PREPARE for every trade — that’s actually a handy acronym for the sliding scale. Let’s break it down…

What You Need to Know to P.R.E.P.A.R.E. for a Trade

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

The key to using the Sykes Sliding Scale is to prepare ahead of time. Again, I’ve been doing this so long that it’s second nature to me.

If you want to get good at it, you’ll have to practice. There’s no ‘easy’ button.

P Is for Pattern and Price

What’s the pattern? What’s the price in relation to the pattern?

Too many newbies buy anything that’s spiking. Don’t get me started on short sellers. They want to short anything that’s up. It’s crazy.

Always look for a clear pattern. At first, you’ll have to test and tweak. That’s trading.

R Is for Risk/Reward

© Millionaire Media, LLC

What’s the risk/reward ratio?

I don’t like to trade something unless there’s potential for a decent gain. I’m not looking to risk 5 cents a share for a possible 10-cent gain. That 1:2 risk/reward isn’t enough for me. I’m looking for 1:3 or 1:4. (Or better.)

E Is for Ease of Entry and Exit

  • How easily can you get in and out of your position?
  • What’s your position size in relation to the average trading volume?
  • What’s your position size in relation to the current trading volume?
  • How fast is the stock moving?

You don’t want to get stuck in an illiquid stock. I learned my lesson the hard way on the biggest loss of my career. (Read about that when you grab your no-cost copy of my autobiography here.)

Also, with fast-moving or choppy stocks, you might have to account for slippage.

P Is for Past Performance and History of Spiking

You should always check to see if a stock has a history of spiking. A lot of stocks come into play again and again. If I’ve traded a stock in the past, I remember. But I still check to see if it has a history of spiking, gapping up, or multiday runs.

I’m a glorified history teacher. You MUST study stock market history if you want long-term success in trading. That includes individual stocks. 

A Is for At What Time and Personal Schedule

© Millionaire Media, LLC

This is SO important. You need to make trading fit your lifestyle. For me, I love to travel. And I spend time on my charity. Normally, I’m not sitting in front of the screen all day watching the markets.

For you, it might be different. If you’re working a full-time job, you have to respect that. If you have an appointment at 10 a.m., you probably shouldn’t get into a trade at 9:59…

Also, time of day matters. I rarely trade premarket or after hours. I don’t like trading midday. For me, the best time to trade is during the power hours.

R Is for Reason or Catalyst

Why is the stock moving? Again, I avoid buying random spikers. Does that mean I never buy a stock without an obvious catalyst? No. Sometimes I do. But that affects my position size. It affects how long I’m willing to hold.

You need to study to know what news has the potential to move stocks… 

Start with my no-cost “Holiday Trading Guide.” Then add StocksToTrade Breaking News to your subscription. It’s my go-to tool for learning what’s moving stocks today.

E Is for Environment of the Market

Three out of four stocks follow the overall market.

You need to understand what’s going on. It might not directly affect the stock you want to trade, but it will help inform your decisions.

3 Benefits of Using the Sykes Sliding Scale

© Millionaire Media, LLC

Many students use the Sykes Sliding Scale to decide if a setup has potential. But there are other benefits, too.

Here are three that go beyond just getting into a trade in the first place.

Use the Sykes Sliding Scale to Modulate Position Size

This is worth mentioning again. Many traders determine position size based on the size of their account or how much they’re willing to lose. And both are valid.

But using the seven indicators can help you refine on a trade-by-trade basis. Sometimes it pays to take a speculative position. At the same time, you can reduce risk by taking a smaller size.

Use the Sykes Sliding Scale to know when to size down — or when to size up in a hot market.

Use the Sykes Sliding Scale for Trade Reviews

Reviewing trades is essential to refining your process over time — especially on a loss.

You might see something you missed that explains why. Use the scale to post-grade your trades. It gives you deeper insight into your ability to read the indicators.

Use the Sykes Sliding Scale to Track Data

Tim Sykes celebrates the sunset in Dubai after creating his watchlist
© Millionaire Media, LLC

I don’t use spreadsheets, but a lot of my students do. You could set up your tracking spreadsheet to include the seven indicators in addition to other data. That way it’s part of your pre-trade process, your post-trade review, and your tracked data. Now THAT would be powerful.

To see how millionaire traders track data, watch the monthly recaps by Kyle Williams, Mariana Hincapie, and Jack Kellogg. (Be sure to hit ‘like’ and ‘subscribe’ while you’re there.)

Also, watch this webinar by Tim Grittani. (You have to be a Trading Challenge member to watch it. Get in.)

How to Learn the Sykes Sliding Scale In-Depth

jack kellogg and sykes in italy
© Millionaire Media, LLC

Now you know my seven indicators, but I’ve barely scratched the surface. To really get it and put it into practice, you need more information. It’s a sliding scale … meaning every trade is different.

Start here…

The Complete Penny Stock Course

Read “The Complete Penny Stock Course” by my student Jamil. It’s still basic when it comes to the Sykes Sliding Scale, but it puts it into context.

You’ll learn my favorite patterns and the catalysts I like. It’s a must-read book with answers to the most frequently asked questions. (You’ll find the Sykes Sliding Scale in Chapter II:11 Sykes Sliding Scale — page 235.)

Trader Checklist Part Deux

If you really want to burn it into your brain, watch my “Trader Checklist Part Deux” DVD. Watch it multiple times. (Trading Challenge students already have access.)

Trader Checklist

Trader Checklist Part Deux takes it to the next level. But all the basics are in the original. The best part? It’s 100% FREE. Watch it twice before we put it behind a paywall again.

More Trading Education

most active penny stocks timothy
© Millionaire Media, LLC

The Sykes Sliding Scale is the result of years of trading experience. It was me taking a step back and asking myself, “What am I thinking and why?”

Now, over 11 years later, it still works for me. So use it. Again, I’m not always right. And I still have to follow my rules — especially rule #1: cut losses quickly. (I trade using these rules.)

Trading Challenge

All my top students are in the Trading Challenge. If you’re ready to get busy, study your butt off, and learn the nuances of trading, apply here today. Fair warning: not everyone gets accepted and no lazy losers allowed.

What do you think of the Sykes Sliding Scale and preparing your trades ahead of time? Comment below, I love to hear from all my readers!

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

* 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”