timothy sykes logo

Penny Stock Basics

How The Rewards Of Day Trading Outweigh The Risks 3 To 1

Timothy SykesAvatar
Written by Timothy Sykes
Updated 1/27/2023 13 min read

URGENT: My top Trading Challenge student has now turned a few thousand dollars into $2.70 million in 4 years…see feature articles on CNN HERE and our appearance on FOX HERE…the longer you wait to apply HERE, the more opportunities you miss to do the same…or better 🙂

Get inspired by my life as you can see glimpses of it HERE and HERE all you wannabe trading challenge students out there, if you’re willing to study hard and become a wealthy trader, thselkle world is yours…literally 🙂

I did a guest post on Trader’s Library the other day entitled “24 Reasons To Day Trade, A Response To James Altucher’s ‘8 Reasons Not To Daytrade” and people really seem to be enjoying it.

James himself linked to it in his daily blogwatch and CrossHairs Trader did a great summary highlighting the best of what I wrote in an article entitled “TIMOTHY SYKES AND THE REWARDS OF DAY TRADING

I’ve reposted my post below because I worked damn hard on it and it’s good:

When I read James Altucher’s latest article entitled “8 Reasons Not To Day Trade”, I couldn’t help but feel anger and within a few hours of reading it, I experienced many of the symptoms he describes, although in a slightly different context…my blood boiled over, I felt as though I couldn’t produce anything until I wrote this response, I rubbed my eyes to see if his post was even real, somehow thinking it was impossible that he could write such blasphemy and then I had a delicious meal at my favorite Rome Restaurant Da Ivo…and I burped a loud and satisfying belch.

You can read my whole biography here but to summarize: as a trader for the past 12 years, day trading made me a millionaire by age 22, a wannabe hedge fund manager by age 23, a reality-TV star by age 25 and now a trading coach/blogger with over 1,000 students by age 29…and trading has taught me many more qualities which are less apparent but equally, if not more, important…

In short, I owe day trading everything and despite my friendship with and my tremendous respect for James, the industry cries out for a rational defense…which I intend to provide.

And just like the occupation itself, whether or not you should day trade comes down to risk-reward. While James lists 8 potential risks, below I have listed 24 potential rewards, giving day trading an overly simplistic yet surprisingly accurate risk-reward ratio of 3-1, an enticing ratio indeed…as any trader will tell you.

1. There are few greater thrills in this world than winning on a big trade in the stock market—and trust me, I’ve done quite a bit of thrill seeking in my life; everything from sky diving (twice), partying in NYC, climbing the Great Wall of China, eating the best sushi you can imagine at 5am at the Tsukiji Fish Market in Tokyo, finishing Paul Lambradt’s 23-course tasting menu at his former Atlas restaurant (try Corton, it’s my favorite restaurant in NYC…next to Soto)

2. Forget trading win thrills, even when you lose trading is exciting intellectual gambling at its finest…no more low odds Keno, years-of-training Poker or elderly Bingo, day trading is THE most exciting way to speculate and if media leaders like CNBC and theStreet.com weren’t so prude, the industry would have a better rep. The now defunct Trader Monthly magazine got the exciting part right, but their incompetent leader Randall Lane wasn’t a trader himself so he didn’t get what trading was truly about and his superficiality wasted any goodness instead focusing on luring luxury brand advertisers and encouraging risk taking and spending (wrong!).

3. You aren’t as smart as you believe and in this economy, you don’t have that great of a future either…the good news is that neither intelligence nor potential is required to be a consistently profitable day trader.

4. James says creating “a system” and mastering its psychology is difficult and that’s true, but the internet has allowed those of us with proven systems to show off and teach others—you don’t need to create anything anymore, this is an enviable time in history where you can use veteran traders to cut your learning time dramatically. I wish it were that way when I started, but back then it was impossible—now is a great time to take advantage of the technological trading revolution.

5. Sure, sure true day trading is unhealthy as ever, but if you’re getting really fat due to eating too much, you probly lack discipline so you won’t be a great trader anyway. In short, health is a great judge at deciding who is mentally fit for trading and if you make it 12 years like I have, even if you’re a little overweight (as I currently am), you’re still a champion just for lasting and the longer you last, the better odds are that you’ve captured a few opportunities and you’re worth enough to hire a trainer…if you can make the time (my problem)!

6. That’s right, trading isn’t just about making money, it’s one of the best endurance tests and mental challenges around. Forget playing Farmville and Angry Birds; are you an adult or a child? Trading separates the men…

7. James talks about how day traders have no career nor networking since watching a position consumes so much time. I agree except for that many with “careers in finance” have it worse—just endless happy hours and cubicle hopping—why do you think mindless entertainment like TMZ, Perez Hilton and CNBC are so popular? Gossip is for the bored and happy hour characters are trying to relive their college days; at least in trading when you waste your days away, it helps you improve over time.

8. And yes while 90% of traders lose (academic studies), if you are part of the magical 10%, you don’t need to read about celebrities and day dream, you have a shot at making the big money so you can produce movies, albums and when your artistic endeavors fail—which they likely will—at least you’ll be connected and rich enough to party with the celebrities enough so you’ll make the gossip pages “financial career”-types can only read.

9. Oh you didn’t know—your dreams of becoming a famous athlete, actor, singer or model—judging by TV ratings these are the careers Americans want—are far worse than the odds of becoming a rock star day trader. I wish there were more detailed stats (hello https://profit.ly in 5 years), but for now experience and logic tells me that many more than 1 out of every 100 veteran traders is a millionaire if not multi-millionaire…not so with those other “careers”, even successful veteran singers, actors, etc. seem to end up in retail sales and as waiters and waitresses.

10. Speaking of movies, just like The Karate Kid waxing cars to learn karate techniques, tape reading, while boring and time consuming, teaches you a TON about the stock market and investor psychology…in trading, there are lessons everywhere.

11. James rips on the lack of social life most traders have, well, here’s a news flash: if you’re even thinking about day trading, you’re probly some weird ugly dude in the first place whose idea of socializing is going on Facebook, PlentyOfFish or Chatroulette…aka you had no life BEFORE you got into trading so at least now you can have no life and try to make enough money to finally compensate for your social incompetence.

12. James talks about being able to feel his own heart beating when a trade is going against him and I get that same feeling. The good news is that as a veteran trader, your body knows when a trade is very wrong and that intense heartbeat isn’t a bad thing, it’s a biological warning system trading has helped you develop reminding you to cut losses quickly!

13. Oh that’s right, while James talks abut the health, social and life risks of losing big, it can all be cured/minimized by one simple rule: cut losses quickly. As most any veteran trader will tell you, this skill is required to survive over the long term and it’s not just applicable in trading, but also for real estate, long-term investing, heck even employee and personal relationships!

14. Yes, staring at computer screen for too long does make your eyes go bad which can be countered by the fact that if you focus on ideal trading setups—which are rarer than the junk that most scalpers play—you don’t need to sit in front of the computer every second. If you look at the charts of my specialty, blatant paid pumps like RMCP, CPMCF and GVBP, the key is having patience enough to wait for them and then play them both on the long and short side when they appear every few weeks. And if you still want to research and watch in the meantime; get a glare protector—it works!

15. As for traders creating nothing, that’s wrong. Traders are the unappreciated oil that powers the engines of the financial markets. We provide much needed liquidity and while estimates range from 5-50% of overall daily trading volume,I hope that the day never comes where traders are removed from the markets in order to discover exactly how much volume we’re responsible for as when that happens the markets would likely crash without our presence. Focusing on my specialty of short selling penny stocks, if short selling of these carcass companies were disallowed, imagine how high some paid pumps would go without any sane forces being able to intervene…instead of stocks surging from $1 to $4 or $2 to $7 in a few days, there’d be runups from $1 to $50 and $2 to $170/share…and the inevitable crashes would be much worse too…total market chaos…day traders, and especially short sellers, are VERY much needed.

16. Unless you’re a forex freak, market hours of 9:30am-4pm are pretty reasonable. Sure, sure, most of us take it over the top, but remember we’re socially incompetent and our ability to party with celebrities and find the best partners is dependant on being successful, so over-working, competition and the never-ending quest for success drives us to be the best we can be…imagine if wannabe artists, musicians and writers had that same drive…oh how much more useful millions of people would be ☺

17. That’s right, since so many traders do lose money, surviving comes down to who wants it the most. So the survivors are usually very well read and can draw accurate conclusions faster than others…oh yes, trading makes you smart and decisive. The key is not getting to arrogant and risk-hungry such as LTCM/Neiderhoffer.

18. Unlike other 9-5 jobs, the best trades usually present themselves at the market open and near the market close…I know many traders who make six and seven figures/year working roughly 2 hours per day and never holding any overnight positions. Name another job with that monetary potential/low risk…I dare you…and I’m talking ethical jobs only.

penny stock checklist

19. Since many traders are adrenaline junkies and many of us have millions, we tend to have a bit of fun. I won’t name all the possibilities of what you can do with your trading profits as that would make you think the fun is limited…while in fact, it’s a big world and the potential for fun/adventure is unlimited. I know talking about money is taboo, but if anybody else would be honest like I am, you’d start to see the potential.

20. If you even know the slightest basics of day trading, even if you fail, the industry is so full of suckers that you can start a “trading education” firm and hardly anybody will even know if what you teach is real or not. There have been several frauds busted and many more not busted who fit this description…but hurry since my two new websites https://www.investimonials.com and https://profit.ly are gaining momentum so creating a profitable fraud is getting tougher and tougher. (Even if you do get caught, you can still write a best-selling book like The Wolf Of Wall Street and negotiate with Leonardo DiCaprio to play you since crime capers are always in demand…easy to film and great commercial appeal)

21. Heck, you don’t even have to be a fraud to teach, learn the basics of day trading, make a little money and then teach honestly. My little $1+ million/year educational product business is run my myself, my dad and my mom and my strategy is unscalable, unable to be covered by mainstream media and full of obstacles! If you have an easier strategy that can consistently earn $5,000/year, you can teach others and sell it for $500/year and everyone wins…seriously. And I know of a TON of traders and strategies that yield between $5,000-$50,000/year, not enough for a full-time career in trading, but if those people also taught, they’d find the supplementary educational income to be greater than the actual trading profits.

22. If you become an expert trader in a niche, it’s pretty difficult to lose. Niche traders don’t get ANY press or respect, but their income is steady and exemplifies how great day trading can be.

23. Think of how many lazy Americans would love to earn solid paychecks just sitting on their fat butts…welcome to day trading.

24. Not to mention that as a day trader, you’re kinda like a cowboy, independent, rugged, rough around the edges…cubicle monkeys and forced-to-be-superficial bankers and brokers are jealous to no end. Go earn your commissions and hate most of the stuff you say, these salespeople are barely human anymore, sad.

25. And if you’ve ever hung around day traders, we talk faster, think faster and do things faster…we get more out of life because trading is a fast-paced job; I don’t know too many day traders who get along with elderly-Bingo-playing-adult-diaper-wearing value investors named Warren.

26. Ah yes, we can have attitudes and most of us become jaded and cynical, but in finance this is required to survive. Traders might feel connected through a kind of “brotherhood”, but we don’t trust each other because trading is a battlefield and veterans understand this.

27. Whoops, I went over my goal of 24 reasons, which brings up my last point; despite working with numbers all day, many successful traders, including myself, are terrible at math! My students, friends and parents laugh when I can’t calculate simple arithmetic problems, but trading involves a different kind of math skillset since the numbers always moving and over time, I develop a kind of gut-based rough-estimate mathematical talent that serves me well in fast-moving trades.

How much has this post helped you?

Leave a reply

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

* 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”