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Penny Stocks News

The Only Way to Buy Into Strength

Updated 7/11/2022 5 min read

This market has me absolutely pumped because we’re starting to see some BIG MOVES!

It’s more than just the nearly $1 million in combined profits my students made on the same stock in a matter of days…

I’m seeing a lot more opportunities open up with penny stocks running like they stole something.

One of my best trades last week has to have been Emergent Health Corp. (OTC: EMGE).

Leading up to July, I focused primarily on morning panic dip buys.

But with some of these stocks burning rubber, I decided it was time to adapt.

Normally, I don’t like to buy into strength.

However, EMGE was one of those news-driven moves with massive potential to run hard.

Here’s how I took designed my setup to manage risk while maximizing gains.

Use Price Action Entries

The best way to get into a runaway trade is during a quick pullback.

This doesn’t always happen, but there is usually at least a handful of ticks that will come in, even by a small amount, that offers a better price than bidding at the highs.

Take a look at the one-minute chart for EMGE.

I highlighted several spots where price backtracked, albeit for a minute at a time.

Even within those one-minute candlesticks, the stock can and will retrace some of its movements.

Manage Risk

Now, I got into the trade a bit after that second red candlestick.

My expectation was that either the stock would trade sideways and I’d get out around breakeven, or we’d get followthrough.

Considering the news had just hit, I felt confident we’d see a pop.

However, the worst case scenario here was it dropped back down to where it opened.

My entry was at $0.014. The open was about $0.009-$0.010.

That gave me downside risk of $0.004-$0.005.

But how could I know what the upside potential was?

Take a look at the daily chart of EMGE.

I boxed out two instances where shares jumped on heavy volume.

The high in the first one was just above $0.022 with the second getting to nearly $0.04.

It’s reasonable for me to assume that shares could run to at least $0.02, giving me a profit of $0.06.

That might not seem like much, but it’s 50% larger than my potential losses.

And that’s being conservative on my stop and profit target.

In reality, I’d likely get out of the trade well before max loss.

With any trade I take, I always want to maximize my possible gains and minimize losses.

That’s why I’m quick to cut positions I don’t feel are working.

The initial run in EMGE let me ride the stock pretty much to the dead highs. I managed to exit near the highs, locking in $5800 in profits.

Now, this sale was a large chunk of my position, but not all of it.

In fact, just past noon, I added to the position at $0.017 after the stock had pulled back.

Unfortunately, the sellers were in control as shares slid lower.

So, rather than ride it down much further, I exited the following day at $0.015.

In retrospect, I should have sold everything at $0.029. However, sometimes these runners can go a lot further than you might believe.

Plus, I thought there might be a possibility of a follow-up spike the following day.

Nonetheless, I walked away with profits from this trade and moved onto the next.

The Bottom Line

Whether you trade off a support level or buy into strength, you need a well-defined plan of attack,

Trading should be mechanical enough to where you could define your actions by ‘If’ statements such as…

If shares trade sideways for more than five minutes, I will exit this trade… or… If the stock drops below $0.01 I will stop out.

That way, you can select setups that meet your criteria and offer the best opportunities for profit.

One of my favorite patterns to work with is the Supernova.

This pattern is great for both new and experienced traders because it offers so many avenues to design trades that match your style.

Click here to see what I mean.



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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”