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Penny Stock Basics

Trade Ideas Guide: How to Come Up With Smarter Trading Ideas

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Written by Timothy Sykes
Updated 10/5/2021 19 min read

With thousands of stocks available, where can you find trading ideas for your trading style and strategy? 

If you’re reading this, chances are you’re thinking about it a lot. The market is crazy right now, and there’s no telling how long the current trend will last. It’s a great time to learn about trading.

How do you find the right stocks to trade? In this post, I’ll give you a detailed primer on trading ideas and some ways to find them. I’ll also give you some tips to help you turn your trading ideas into trading strategies.

Let’s go!

What Are Trading Ideas?

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Think of trading ideas as setups. You see them over and over, so you learn to recognize scenarios before they play out. Will you always be right? Of course not. But with experience, you can learn to spot potentially profitable opportunities.

Maybe you’ve seen evidence that a stock will move in a particular direction. So you think about not just how high or low it will go, but in what time frame.

Trading ideas evolve into complete stock market trading strategies. Over time, you’ll get better at spotting the patterns that work best for you.

Different Types of Trading Strategies

differente types of trading strategies ideas
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Day Trading Ideas

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Day trading is buying and selling a stock on the same day. You enter the trade after the market opens and exit before it closes.

I’m a day trader. I might hang on to a stock for just a few minutes before taking small profits …  or hold a position for a few hours, or even overnight.

The important thing is to create rules for yourself. What are your day trading ideas? When will you buy into a position? When will you let an opportunity pass? What patterns do you trust most?

Forex Trade Ideas

Forex trading is about spotting situations where a trading pair — such as the euro and the U.S. dollar — might crack support or break resistance.

I don’t trade forex, but I know lots of people who do. They get trading ideas by paying close attention to how currency pairs behave over days or weeks. They stay on top of world economic news and watch how currencies react.

How to Come Up With Profitable Stock Trade Ideas

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Every trading idea deserves your attention. You never know what will work for you and what won’t. I have lots of friends who trade stocks, and we all have different approaches … even though our strategies may overlap.

Start with time of day and market conditions. What’s your risk tolerance level? That can play a big role in how comfortable you are with different setups.

From there, move on to more specific trading ideas. Do you prefer technical or fundamental analysis? Do you stay up to date on news?

Maybe you want the hottest news fast, like I do. With StocksToTrade’s Breaking News Chat, two market pros alert you to the news that can really move stocks. These alerts have helped me find tons of trading ideas. Check it out … a 14-day trial, including StocksToTrade, is just $17.

Don’t focus on profits when you’re thinking about trading ideas. It’s all about the process. Know yourself so you can avoid potential pitfalls and become a better trader over time.

Tim’s Trade Ideas

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Here are some of my top trading ideas for new traders.

1. Learn About Trading

Think you’ll come up with great ideas without hard work? Think again. While you may have stock trading ideas, without the knowledge to back them up, you’re basically gambling.

Start by reading “The Complete Penny Stock Course,” written by my student Jamil. It answers so many of the most frequently asked trading questions.

Also, check out my FREE guide to penny stocks. You’ll learn about day trading, stock charts, trading setups, and more.

2. Invest in the Right Technology for You

When I first started trading, resources for day traders were pretty rudimentary. There’s so much available now — trading scanners, AI software…

My go-to software is StocksToTrade. I use it every day. You can see the top percent gainers and losers, quickly scan for highs and lows, filter data for research, and even search Twitter feeds. Can you think of another stock screener that combines Twitter feeds with your scans?

StocksToTrade’s paper trading module is as close to trading with real money as you’ll find. And it’s designed for low-priced stocks. Get your 14-day StocksToTrade trial today for only $7.

Full disclosure: I helped develop StocksToTrade, and I’m an investor. That’s why I’m psyched to tell you all about its amazing features.

Technology alone won’t make you a great trader. (See tip #1.) But it can give you insight into stocks and help you generate stock trading ideas.

3. Listen to Podcasts

There are lots of amazing trading podcasts out there, and they can help you generate trading ideas. I think it’s smart to listen to as many traders as possible.

At the top of my list is the SteadyTrade podcast. It’s all about empowering traders without overloading them with unnecessary information. Listen in to learn valuable market information, like how to adapt to the market.

TWIST is another great trading podcast. It’s run by some Trading Challenge students turned moderators: Jack Kellogg, Matthew Monaco, and Kyle Williams. All three have now made over $1 million in trading profits.*

You can listen to podcasts while you’re driving or exercising. Always keep learning. It’ll help you in your trading.

(*These traders’ results aren’t typical. These traders put in the time and dedication and have exceptional skills and knowledge. Most traders lose money. Always remember trading is risky … never risk more than you can afford. I’ve also hired Matt, Kyle, and Jack to assist me in my trading education business.)

4. Prioritize Scanning and Research

Study, study, study. I got where I am today by being obsessive about reading stock charts, and it’s a habit that I try to instill in all my students.

Studying stock charts is one of the best ways to start noticing patterns. This is what will help you decide whether a stock is a good trade. But it’s not just about looking at the charts … It’s about figuring out what they mean.

One way to start is by scanning the stock charts and filtering for gainers or losers. From there, you can zero in on a few potential stocks to add to your watchlist. But filtering the volume and percentages isn’t enough. You’ll need to do research to back up the information.

Scanning and researching can give you some trading ideas even if you don’t trade a particular stock. You might notice most of the gainers are in a particular sector or industry. Then you can look for other stocks in that sector.

5. Seek Out Catalysts

Catalysts can be powerful predictors of price action, for longs and short sellers alike.

A catalyst is anything that happens to a company that might affect its stock’s value. It can be good or bad news. It’s not just about the news — it’s how the stock reacts to the news.

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Say a company announces a new product it claims is the next big thing. Or they’ve hired a new CEO. These are things that can potentially drive the company’s stock up or down.

Following the news can clue you in on potential catalysts. Or catalysts might be something you look for after you’ve scanned for trading ideas. No matter when or how you look for catalysts, they can help you generate trading ideas.

6. Look at the Market’s Past Performance

Study the past to help predict the future. History repeats itself — not exactly, but it rhymes. It comes close enough to give you trading ideas.

As you begin to notice patterns, look at past market behavior. Let’s say you find a big gainer. How has it, or a similar stock, performed in the past? Asking those kinds of questions can help you see how the pattern might play out, and whether you stand to profit — or lose big.

Of course, you can’t predict what will happen. The market’s constantly evolving. But by looking closely at the market’s past performance, you can make far more educated decisions.

Trading stocks, particularly penny stocks, can be risky. Honestly, this will never change. All you can do is research, study, and do all you can to mitigate that risk. Cutting losses quickly is my rule #1 because it’s the biggest thing you can do to help mitigate that risk.

7. Learn From Other Traders

If everyone else is doing something, should you do it, too? Absolutely not. But you may benefit from watching from a safe distance.

Keeping an eye on the ‘competition’ can be a great way to generate trade ideas. Following successful traders like Jack Kellogg can help give you ideas for setups and trading styles.* Check out Jack’s story in this video…

But you’ll never become successful by trying to copy another trader. Even if all their trades are public, you can’t know what goes on in their mind — or how they go about doing their research. You’ll never execute a trade exactly like them, so why bother? It’s an exercise in futility.

So instead of trying to copy another person’s trades, try to take what you can from their overall approach and style. Follow their progress and use it to stimulate your growth. You have to develop your own trading style.

Tips to Help You Get Started With Trading Ideas

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I don’t tell my students how they should trade. I offer them the tools to forge their own paths to success.

It goes back to the idea of teaching a man to fish. If I tell you how to trade, you might be successful once, twice, or maybe even multiple times … until eventually, you won’t be.

But if I give you a broad approach to trading, you’re set with the building blocks for a successful career. You’ll be able to generate your own trading ideas.

Here are a few tips I give my students…

Choose High-Volume Stocks

Volume is critical. If nobody’s trading a stock, you don’t want to trade it, either — especially if it’s a penny stock. The low volume there makes it way more difficult to exit a trade.

Volume adds liquidity, which means it’s easy to get in and out. With a low-volume penny stock, you’ll find it hard to get in at your entry point … Even worse, you might be stuck in a stock when you want out.

View Momentum Indicators

Momentum describes how quickly a stock’s price moves. Is it bouncing up and down like crazy, or do you see sideways price action?

A flat line isn’t good for your heart or your bank account. You want lots of momentum so you can take advantage of small moves up or down.

Some good momentum indicators are volume-weighted average price (VWAP), moving average convergence divergence (MACD), and relative strength index (RSI). Learning about these indicators can help you understand price action.

Trade Ideas Charts

Charts are reflections of price movement. You can see the movement graphically, which helps you make faster, more accurate decisions. That’s technical analysis.

Technical analysis is all about reading a chart and deciding what will happen based on what you can see. There are line charts, bar charts, point and figure charts, and candlestick charts.

If you’re serious about learning how to use charts and other trading tools, apply for my Trading Challenge.

Fundamental Analysis

Fundamental analysis is looking at a company’s intrinsic value. It’s all about reading financial documents and paying attention to the news. It can help you spot potential catalysts before they occur.

I trade penny stocks, so I use technical analysis most of the time. That’s because I care more about a stock’s price than the company behind it. Most penny stock companies fail, and their fundamentals show that. That’s why I use technical analysis to place trades and aim for quick, small gains.

Set Up Price Alerts

I might live and breathe the stock market, but that doesn’t mean I don’t have other interests.

Price alerts can help you take advantage of setups even when you’re not tied to your computer. Most brokerages allow you to set price and volume alerts for your account.

I use StocksToTrade alerts to notify me when a stock hits a specific price, when there’s breaking news in penny stock land, or when something’s up with volume.

Don’t Trust Promoters

I say this almost daily — it’s that important. Promoters are interested in one thing only: lining their pockets. They don’t care about yours.

This industry is full of promoters. You’ve got to be aware of them if you want to stay in the game. I like to call out sketchy promoters when I see them say a stock is “going to the moon”…

I don’t think promoters are all bad — I love the momentum they can bring to stocks. Just don’t overstay your welcome. Sell into strength so you don’t get caught in a pump panic.

Master Your Trading Skills

If you’re feeling overwhelmed, you’re not alone. It can take years to feel comfortable trading stocks, and even then, you won’t win every time.

One way to speed up the learning process is to join an active trading community. My Trading Challenge offers the chance to learn from me and the top traders who’ve been in your shoes. You get access to my massive video library, regular webinars, and an awesome chat room.

You can also join Profit.ly and share your trades with others and read about other traders’ experiences.

If you’re brand new to trading, paper trading can help you get more comfortable. StocksToTrade has a great paper trading feature so you can practice before you put real money on the line.

(Full disclosure: I designed and developed both Profit.ly and StocksToTrade and am an investor in StocksToTrade.)

Trading Challenge

Are you ready to take your skills to the next level? Apply for my Trading Challenge. You must be ready to work. I only accept those who are dedicated to doing what it takes to make it in the markets. Apply today and find out if you make the cut.

2 Top Trading Ideas for 2021

2 top trading ideas for 2021
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Let’s go over two trading ideas that can be game-changers this year…

Keep a Trading Journal

A trading journal is a must. Without one, you won’t be able to properly track your progress. Especially with the market as hot as it’s been this year.

With so many volatile stocks, it’s hard to keep track of the patterns you’re trading. A trading journal will help you remember the reasons for your trades, how you felt during them, and what you learned. Over time, you’ll see what works for you and what doesn’t.

Focus on What’s Working

Once you have a substantial trading journal and know what’s working for you, focus on those patterns! You know what they say … If it ain’t broke, don’t fix it.

Say you have a 75% win rate on breakouts but only a 25% win rate on other patterns. Wouldn’t you rather win 75% of the time instead of 50% or less?

I know, when I put it that way, it’s an easy answer. But seriously, too many traders bring losses upon themselves. Don’t get me wrong … I think it’s good to try different strategies and find what works for you. But once you figure that out, stick with what’s working.

Once you have a solid foundation, you can branch out. But if you flip back and forth between patterns, you’ll struggle to master any of them. And you’ll risk blowing up your account in the process.

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What Are the Best Trading Strategies for Beginners?

There’s no one-size-fits-all trading strategy. But there are a few strategies that I’ve found to be effective for beginners: breakouts and panic dip buys.

Breakouts happen when a stock breaks a resistance level that was previously a high point. It can be anything from an intraday breakout to a 52-week high. When a stock breaks out, it can bring in lots of buyers to push it even higher.

Panic dip buys are the opposite. When a stock that’s been uptrending suddenly comes crashing down, buyers pile in to take advantage of the discount, driving the price back up.

The most important thing is to remember to always cut your losses quickly when a trade goes against you.

Which Trading Is Most Profitable?

There isn’t one trading strategy that’s the most profitable. Any strategy can work or fail. It all depends on you — your determination and your discipline.

Trading Ideas: The Bottom Line

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Trading stocks requires a lot of knowledge. Without it, you won’t be able to think for yourself as you try to read charts, spot patterns, and react to catalysts.

Figure out what trading ideas work best for you, then put them to the test. Use them over and over again as long as they work. If they stop working, find new ideas to replace them.

What are your best trading ideas? Why do you like them? Let me know in the comments!

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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”