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Mentor Updates

Millionaire Mentor Update: An Important Trading Lesson

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Written by Timothy Sykes
Updated 1/4/2023 10 min read

Welcome to another edition of the Millionaire Mentor Update — every week I post a trade or trading lesson. I also answer two or three student questions. Finally, I love to share an update about my travels, charity work, and passion for great food.

My life is awesome. Had I not made a decision nearly two decades ago to learn to trade penny stocks, it might be very different. My main gig now is teaching people just like you to trade. If you’re ready to get started, apply for the Trading Challenge today.

I recently spent a week in Mykonos and three days in Santorini. But I’m checking in from my favorite city in the world: Positano, Italy. I’m here just chilling and eating amazing pasta. I’m also recovering from months of whirlwind travel.

The place where I’m staying might just have the fastest Wi-Fi in Italy. As a result, teaching and trading are a little easier. And, the time zone here is great for trading the U.S. markets.

Let’s get into a trading lesson…

Trading Lesson of the Week

This week’s trading lesson is all about patience.

Patience Is Key to Long-Term Trading Success

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Like I said, I’m in a good time zone to trade, but I’m not necessarily taking more than one or two trades in a day. I think a lot of people can learn from this.

Too many people are conditioned to work hard. I get it. You want to make money, so you’re trading a lot. Consequently, you’re churning and burning your account like so many newbies do. It seems very tough for newbies to learn patience.

The best trades don’t happen all the time with penny stocks. Your approach has to be counter intuitive.

What do I mean by that?

Sometimes the best thing you can do is go outside or go and have fun with your friends. That’s better than trading a crappy setup. Even though it might not feel like it at the time.

Normally, you wanna trade. You wanna grind. Then you start justifying your trades….

“You know, this setup wasn’t that good, but at least I learned something…”

Well, maybe you shouldn’t have been in the trade in the first place. I would rather you undertrade than overtrade. Especially during the summer.

So, learn patience and trade less.

If you don’t want to go out with your friends and you still wanna work … guess what? You can study the past. I have 6,000 video lessons. Not to mention DVDs and over 1,000 webinars. Trading Challenge students get access to all archived webinars.

All My Top Students Developed Patience

Every. Single. One.

Most of my top students struggled for a while. Tim Grittani wasn’t consistent for nine months. He made almost nothing. Let’s face it, there’s a lot to learn. But even if you fully dedicate yourself to learning every aspect of trading, in the end, it’s you against you.

By ‘you against you,’ I mean you have to learn to control your emotions. You have to develop a sense of peace with not trading. Learn to take small losses instead of holding and hoping … turning a mistake into a nightmare.

Remember: patience is part of the process. Learn to love the process. Likewise, learn to be patient not only with the process but also with each day as a trader. When there aren’t great trades … study the past. Or go have some fun.

Now, let’s get to a few trading questions from students…

Trading Questions from Students

Before I answer this week’s trading questions…

I want to remind you, the best way to immerse yourself and build your knowledge account is to…

… join the Trading Challenge.

The answers I give here, frankly, are not as in-depth as those I give during live webinars.

“Tim, $DCGD has been really impressive. Given Discovery Gold is…

  1. a shell company…
  2. recently purchased by a hedge fund manager… 
  3. going through a name/ticker change…
  4. but … has ZERO products or revenue… 

… why is it running?”

First, when you see a ticker with the dollar sign in front — that’s a common way of writing it for chat rooms and Twitter. When you post a tweet with a $ in front of the ticker it creates a tag. In the Trading Challenge and TimAlert chat rooms, it creates a tag so when you click the ticker it pulls up a chart.

First, check out the one-month chart:

DCGD: 1-month chart, 5-minute candlesticks — courtesy of StocksToTrade.com
DCGD: 1-month chart, 5-minute candlesticks — courtesy of StocksToTrade.com

And now, my answer to why DCGD is running.

I don’t care.

I think too many people worry about the why, why, why…

… instead of just listening to the market.

As for the points about Discovery Gold — there are rumors galore. It is a holding company. And it is now controlled by somebody supposedly managing a billion dollars. So, there’s something behind it.

But the bottom line is…

… I don’t care why it’s running.

Pay Attention to Price Action

Focus on price action when you’re trading these kinds of stocks.

I’ve traded Discovery Gold Corporation (OTCPK: DCGD) five or six times. I also included it in my top penny stocks to watch, August update watchlist.

Here’s the key: On the first four trades, I nailed it every time because the price action was similar each time.

For example, on August 2, I bought the Friday mid-day spike because I recognized the price action. It was the exact same price action as the last time it ran 50% in a day. That was on July 22. It actually ran more than 50% on July 22 — more like 150%. The point is, the price action was the same. Even the time of day the spike gained momentum into the breakout was similar.

Pay Attention To Patterns

And on August 5, I banked on it again when it went from red to green.

(Note: ‘Red to green’ refers to the stock price relevant to the previous day’s close. When a stock’s price is below the previous day’s close, it’s red. And when it moves above the previous day’s close, it’s green. The red-to-green breakout is one of the patterns I teach students to look for.)

So, I banked on the red-to-green move and took my 10%. It turned out to be a 30% winner — so I underestimated it.

Know When to Dig Deeper

I suppose there could be times when you really need to know all this stuff. Like if you’re a short-biased trader looking for reasons why the stock would fail. I discussed it a little in the last edition in a question about reading SEC filings.

Update: On August 8, DCGD dropped more than 31% from the previous day’s close. Again, I pay attention to price action. This time I was looking for the dip buy. I took a small loss when I misjudged the bottom on the morning panic. It did manage to bounce nicely off the low of $0.611 — just a little later in the day than I expected.

Final trading question…

“You often reduce position size on an FGD near the close to lock in profit/reduce risk on overnight holds. How do you decide how much to take off?”

What Is a First Green Day?

FGD stands for first green day. Watch the video below to learn the basics of the first green day pattern. Then, read on to understand why I sometimes alter my position size on FGD trades.

Back to the question…

Sometimes I take off the entire trade.

For example —  when I made $1,950* on my August 2 DCGD trade, I could have held overnight. It was closing relatively strong, although not at its highs. But the trade had already hit my profit goals so I took the whole thing off.

(Remember, my results are not typical. I put in the time and dedication to develop exceptional skills and knowledge. Many traders lose money. That should keep the lawyers off my back. Love ‘em … but they get picky when I start talking about profits.)

Now, if the stock hasn’t hit my profit goals, I might take half off. Likewise, if the stock is looking weak, I might take three-quarters off. That way I can give the last quarter a little bit of a chance.

You have to choose based on…

  • Your profit target.
  • What that market is doing.
  • Your own schedule.
  • All the other indicators I talk about in my Trader Checklist.

There’s not one indicator like so many people want. There are seven. Also, it’s a sliding scale. That’s exactly what the Sykes Sliding Scale is for.

So — to answer the question — I try to judge. It’s not an exact science. Sometimes I sell half when I shouldn’t have sold any. Other times, I sell all and it was the right move. It varies.

Because of this, you can’t make one general rule. I just like to reduce risk overnight. That’s a general guideline rather than a hard-and-fast rule. My instinct is to play it a little safe.

So, whether you sell a quarter of your position, or a third or whatever, you have to judge. How do you judge? Again, it’s based on the trade, the chart, the market, and your schedule. You should consider all the indicators in the Sykes Sliding Scale.

Millionaire Mentor Market Wrap

That’s the latest edition of the Millionaire Mentor Update in the books. I hope you’ve added to your knowledge account. The trading lesson can help you build the foundations for trading. The answers to trading questions can help you understand the nuances. It’s all part of the process.

For more in-depth knowledge and resources, join the Trading Challenge. When you join, you’ll get to ask questions like these directly during one of the weekly webinars.

Are you a trader? How do you use the Sykes Sliding Scale? Comment below. If you’re a total newbie, comment below with what you’re doing TODAY to build your knowledge account.

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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”