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Trading Lessons

Trading Lessons From an Awesome 64%+ Bouncer

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Written by Timothy Sykes
Updated 1/12/2022 11 min read

Trading Lessons From the DOGZ Bounce: Key Takeaways

  • Trading a bounce starts with pattern recognition (3 DOGZ charts included here).
  • It’s better to stick to your plan even if it means missing a trade. See lessons #2 and #3.
  • Trading rules transcend markets. Heed lesson #5 well…

Click below to…

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7 Lessons from an Awesome 64%+ Bouncer

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On January 7, Dogness (International) Corporation (NASDAQ: DOGZ) had a 64% bounce in 47 minutes. It’s good to learn from action like this while the chart’s fresh.

Many of the best trades right now are quick, especially near the market open. I didn’t trade this one — lesson #2 explains why. Let’s get straight into it.

Trading Lesson #1: Recognize the Pattern

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It’s always easier to see the pattern in hindsight. But that’s part of the learning process. So first, here’s the DOGZ intraday chart from January 7…

DOGZ chart
DOGZ January 7, 2022 chart: morning panic, double bottom bouncer (Source: StocksToTrade.com)

As you can see, DOGZ had a small morning panic. Then it had a perfect double bottom before bouncing 64%. (It top ticked 80% off the low of the day, but only for a few seconds.)

Learn to recognize the pattern — in this case, the double bottom. I usually miss out on double bottoms when my thesis doesn’t match the price action.

But there’s another pattern lesson. Check out the DOGZ two-day chart from January 6–7…

DOGZ January 6–7 chart: day-two bounce off all-day fade (Source: StocksToTrade.com)

You can see how DOGZ had a huge dump with several fakeout bounce attempts on January 6. That frustrated a lot of traders — including me with a $360 win, a $550 loss, and a $550 win.

Understand the overall pattern. The morning panic wasn’t big. I thought it would go further. That said, I don’t like buying afternoon dips, so I was reluctant to go big on January 6 in the afternoon.

But when a stock that’s up a lot fades and closes weakly, it can lead to a morning panic the next day.

That brings me to…

Trading Lesson #2: Respect Your Trade Thesis

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A lot of students wondered why I didn’t dip buy since I was commenting in chat…

01/07 9:35:47 AM: More $DOGZ panic, the bigger the better for any potential bounce today

Why didn’t I buy it? I was looking for max panic, and we didn’t get it. Just before the double bottom, I commented…

01/07 9:38:21 AM: C’mon under $2.50 $DOGZ lure in all those early dip buyers

01/07 9:41:30 AM: $DOGZ so close to cracking, c’monnnnn

So I called it pretty well in chat. But it didn’t fit my thesis. If it had broken $2.50, I think it would have set off stop losses leading to max panic. If it had dropped to the $2.30s, I was prepared to take 100,000 shares.

DOGZ didn’t crack $2.50. Did I miss a big opportunity? Yes, but I have zero regrets. This goes back to my retired trader mindset. It’s a good reminder…

Trading Lesson #3: Stay Disciplined

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I didn’t know it was gonna double bottom at $2.50. But I did NOT want to buy just anything. You shouldn’t want to trade.

If the stock had done what I wanted, I would’ve come out of retirement. Have the mindset that you don’t want to trade and wait for a stock to do exactly what you want. In the long run, you’ll do better.

I could have changed my thesis and bought it when it started bouncing. The problem with that is that once you start compromising it’s easy to create bad habits. Stay disciplined.

Since I missed DOGZ, I used it as an opportunity to learn and teach. And one lesson that stands out is…

Trading Lesson #4: Take Profits Into Strength

Everyone who rode DOGZ up in November and December got absolutely clobbered. Check out the DOGZ six-month chart…

DOGZ 6-month chart: classic pump chart pattern (Source: StocksToTrade.com)

This is just another example of what can happen if you don’t take profits into strength. Don’t follow the herd. The DOGZ chart is a lot like bitcoin and so many other speculative assets.

This is what can happen in one day. And nobody is sure of anything.

A lot of dumb, arrogant, naive newbies don’t realize the risks they take. And it’s not just penny stocks. People get offended when I say to sell into strength. I’ve been warning about it for months…

To be fair, I underestimated bitcoin and a lot of plays. I underestimated how stimulus-check-funded accounts would prop up all these markets.

But … no more stimulus checks. And THAT leads to…

Trading Lesson #5: Trading Rules Are NOT Optional

It’s not optional whether you should cut losses quickly or take profits into strength. These are trading rules for all markets.

Top tip: You don’t even have to tell your Discord chat or Reddit thread where everyone will label you a traitor.

I got some sad messages from people who’d been in DOGZ for weeks. They didn’t take profits. Then … “I’m down, what do I do?”

You already broke your trading plan. I don’t know what to tell you after the fact. That’s why I try to warn people ahead of time. Next time you see this pattern, remember this post. Trading rules are NOT optional. 

The good news? Several Trading Challenge students traded DOGZ and did well. It didn’t matter that I missed it. Why? Because they’ve become self-sufficient by following the next lesson…

Trading Lesson #6: Focus On the Right Setups

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Trading Challenge mentor Mark Croock nailed the dip buy on DOGZ. (Mark uploads his trades to his Profit.ly page in bulk, so I can’t show you his exact trade.) But here are his comments in the Trading Challenge chat…

09:46 AM markcroock: long 7500 DOGZ 2.68

09:51 AM markcroock: all out 2.96

09:56 AM markcroock → timothysykes: thanks for continuing to mention DOGZ doubt i would have traded it otherwise

The point is that when you have a stock making a 50%+ bounce inside of an hour, you really need to focus on these kinds of setups.

Again, it wasn’t just Mark, there were more. They were able to capitalize because of…

Trading Lesson #7: The More You See It…

why do you need a trading plan
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Like anything worthwhile, successful trading requires experience. You need to see the patterns again and again.

There was a lot of “the markets are boring…” on social media that day. I don’t know what other people are looking at.

Trading Challenge students who traded DOGZ had seen (and studied) the pattern before. They’d watched volatility halts before and had some understanding of possible outcomes. And they knew to pay attention to key levels.

Take Croock’s trade, for example. His risk was $2.50 — a key psychological level and the low of the day. He was out at $2.96 when the stock approached another key level.

Did he leave money on the table? Yes. But he had a clean trade with clear risk and a solid trading plan.

Bonus Trading Lesson: Use the Right Tools

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People who aren’t Trading Challenge members often DM me and ask where they can find these kinds of plays. It’s simple…

Use StocksToTrade

Yes, there are other scanners out there. I’m partial to StocksToTrade. (Yep, I’m an investor.) STT has my favorite scans built in. It’s designed to find plays like DOGZ.

Use StocksToTrade’s Breaking News Chat

It astounds me that more traders don’t use STT Breaking News Chat. I refuse to trade without it. At least give it a try — I think you’ll be amazed by what you’ll learn about the market. It’s not even about finding every trade.

Get in the Trading Challenge Chat Room

Seriously. The Challenge chat room is a tool. We don’t allow ‘follow the leader’ BS or pumping. (The other moderators and I instantly gag anyone who tries to promote a stock.)

Of course, there’s a caveat. To get in the Trading Challenge chat room, you have to be a member of the Trading Challenge. It’s where all my seven-figure students honed their skills.

Click Here to Apply for the Trading Challenge

What do you think of these 7 trading lessons from an awesome 60%+ bouncer? Comment below, I love to hear from all my readers!

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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”