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Is This A Better Way To Trade Volatile Stocks?

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Written by Timothy Sykes
Updated 6/7/2023 6 min read

In one day, the stock TOP catapulted from $6.25 to an astronomical $260.

An unexpected windfall for some but a disaster if you shorted.

And while it’s super risky to short a Supernova like TOP, it’s also not easy playing the long side either.

After all, the stock can sharply sell-off and create a series of stop-loss orders to go off.

The longs get taken out…more shorts pile in…as more shorts get sucked in, the stock reverses and trades higher.

This is one-way longs and shorts can lose trading the same symbol.

That’s why I usually don’t bother trading these unless I get the ideal setup.

Like the one, I had in AITX the other day.

A trade that delivered double-digit returns in less than 24 hours…and one of the main setups I would be trading right now if my goal was to build a small account.

Here’s what you need to know about it…

Why I Love Trading OTC Stocks

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Companies like Charles Schwab, Morgan Stanley, and Goldman Sachs hire armies of analysts to cover stocks like Apple, The Home Depot, and Visa.

You see, when it comes to the top 100 companies in the market, it’s hard to be surprised because these stocks have so much Wall Street coverage.

It makes no sense for me to trade these stocks without an edge.

You see, these firms rarely, if ever, look at penny stocks.

Why?

Because most penny stocks are crappy companies.

A lot of them are pumps and dumps.

But that’s why I love trading them.

First off, the level of competition is easier. 

Penny stock promoters are not nearly as sophisticated as a Goldman Sachs banker, and the people who trade penny stocks are not nearly as skilled or knowledgeable as the smart money on Wall Street.

I believe that if you study long enough that you can find a pattern in trading penny stocks.

Like the one, I’m going to show you right now in AITX

Can You Spot The Setup In AITX?

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On June 5th, AITX’s subsidiary, Robotic Assistance Devices, announced it was preparing RADDOG 2LE’s Launch as its introduction on Fox Entertainment’s “Stars on Mars” June 5th, 8 PM ET episode.

Source: AITX.AI

Why I found this compelling:

  • RAD’s RADDOG 2LE would be featured that evening on national television, FOX’s “Stars on Mars” reality show.

 

  • RAD’s RADDOG 2LE will be formally introduced on June 6th, with a demonstration.

 

I’m not going to lie, had I read the press release, I would have bought the stock immediately.

Why?

Because the company just announced two hypey events in the upcoming future.

In my mind, anyone seeing the news will likely want in.

Especially given how hypey AI stocks are right now.

I saw it as a one-two combo.

In my opinion, this gives me a cushion of sorts. The company is positioning both these events as positive, and that’s likely how traders will perceive them too. This tells me there’s likely to be less selling pressure in the near term.

The morning runup was an awesome one…and it sucks I missed it. But I did see the stock trending higher near the close so I decided to buy some shares ahead of these two catalysts.

And that’s what I did…

Getting in at $0.119

The next day the company released this press release:

AITX’s Subsidiary, Robotic Assistance Devices, Unleashes RADDOG™ 2LE, the Robotic Dog for Law Enforcement Applications

While it wasn’t a monster catalyst, it spiked the stock enough for me to get out, taking profits at $0.0135…good for a move of 13.5%.

Source: Profit.ly

 

Clearly, this company is trying to pump its stock.

On Wednesday, it issued another press release, this one:

AITX’s Subsidiary, Robotic Assistance Devices, Receives Multiple ROSA Orders from EPIC Security Works

For me to trade this again, I’ll need to see more compelling press releases and interest in the form of volume. I want to see trading volume significantly above its average.

Final Note

© Millionaire Media, LLC

Sometimes companies will tell us beforehand that they will be pumping their stock. I love these setups because they give you a cushion and favorable risk vs. reward.

Remember, these are quick trades for me. I don’t look at these companies as investments.

And while I love this setup…

It doesn’t compare to this one. 

In fact, tomorrow, I’ll likely be placing a trade utilizing it.

===> Find out how to get it here

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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

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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”