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Trading Recap

Should You Trade During A Market Sell-Off?

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Written by Timothy Sykes
Updated 2/27/2023 6 min read

People love to freak out when the markets take a tumble.

The thing is, that’s when some of the BEST trade opportunities arise.

And finding them is easier than you think.

Despite a nasty sell-off on Friday and the major averages having their worst decline in 2023, I managed to execute a perfect trade that netted me nearly $2,000 in trading profits. (I risked $2,955 in capital to make $1,980). 

Yes, good opportunities still exist…

Even on days, the overall market is getting walloped.

But you’ve got to be super-selective and patient.

Especially when 3 out of 4 stocks follow the market.

That’s how I nailed a 67% winner in the ticker symbol FAGI utilizing this strategy

Let me show how I did it…

Ugly Market, No Problem

Investing and trading are two different things. When the market sells off, it strikes fear into investors because it creates uncertainty about the future.

But as traders, we know opportunities exist when the market is ripping higher or tanking hard.

You want to focus on how the stocks you’re trading are reacting.

For example, my main focus is on trading penny stocks. And one thing I’ve seen lately is that we do not see a lot of follow-throughs.

In other words, after a stock has a strong up-move, it doesn’t follow through the next day.

In a little bit, I’ll explain why it’s important and how it helped me manage my trade in the ticker symbol FAGI. 

Trading One Of My Favorite Setups

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I love trading this setup on Fridays.

And that’s what I saw in the ticker symbol FAGI last Friday.

At around 11ish, I saw that there was an SEC filing on a merger. 

And the stock quickly reacted to it…moving from $0.02 to $0.024.

Now, when I typically trade this strategy, I’m looking to take these plays much later in the afternoon, about an hour or so before the close.

A lot of choppiness occurs during the mid-day, and it’s hard sometimes to hold through it. And that was one of the main reasons why I didn’t jump on it right away.

That’s where patience comes in.

I’m comfortable with the idea that I might miss a trade.

On the other hand, newbie traders will see the catalyst, see the stock trading higher, get excited, and buy because they have FOMO.

I know better.

So while I missed the initial spike, the stock actually sold off a few moments later, dipping to around $0.02.

Not knowing when or if the press release would follow the SEC filing, I decided to take a small position.

I took a small position because it was still early for this type of trade.

Good thing I did because a few hours later, the stock dipped to around $0.02. It was after 1 PM, so I decided to add to my position.

That’s one of the benefits of starting a position small. If you’re unsure of your timing, you have room to add later on.

My goal was to wait for the press release from the catalyst, believing it would push the stock higher.

However, the stock started raging…

And although I wanted to wait for the press release…it was trading at $0.03.

That’s a 50% gain in about 3 hours!

I had to take some profits off the table, so I sold a little bit more than half of my position with the idea that I would hold the rest for the weekend.

I see many newbie traders get excited when they see profits on their screens. They want to grab them right away.

And that’s something you’ve got to learn to fight. You want to focus on the trade and stick to your plan.

But you know what?

This stock kept raging higher…

And when it hit $0.0361…I had to get out and take my profits.

Yes, I initially wanted to hold on and follow my plan all the way through.

However, I know that a 67% winner on this strategy is above average.

And when the market gives you a gift, you don’t ask questions—you take it.

Here is my play-by-play that was sent out to subscribers:

Source: Profit.ly

 

Bottom Line

I was able to capitalize on FAGI for a couple of reasons:

  • Strong catalyst
  • Good entry price
  • Patience

Although I initially planned to hold it longer, the market gave me a gift, and I couldn’t refuse it. If you’re patient and you know what setups work, you can even find trades on heavy-down days like last Friday.

The key is to stay disciplined and patient. If I had gotten too excited and bought at $0.024 after the initial spike, I would have gotten stopped when it dipped below $0.02.

I wasn’t upset that I missed the trade, and when the stock sold off, it allowed me to enter at a price I liked.

If you want to learn more about this strategy and how it works…Click here to get started. 


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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”