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Trading Lessons

Lessons on Trading Penny Stocks Conservatively

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Written by Timothy Sykes
Updated 10/21/2021 5 min read

Trading Penny Stocks Conservatively: Key Takeaways

  • Learn how I called a massive Monday morning dump. (The promoters were wrong!)
  • Even in a slow market, I can still profit by trading conservatively.* See how I do it…
  • Check out my newest video lesson — I made over $3,000 on Monday, October 11, and stayed safe…*

It’s a scary market right now — so you MUST learn to trade conservatively. A lot of newbies started back in 2020 when we had the hottest market since the dot-com boom. It was crazy…

But too many traders learned bad lessons. They think every first green day is a done deal or that every breakout will go to the moon. Nope. Now that the market has slowed down, people who learned the wrong lessons are giving back profits.

I want you to block out the promoters and the scammers who tell you to hold and hope. That’s how you blow up your account. Don’t listen to their lies and false promises.

Instead, find out how I stay safe and profit in an ugly market. Let’s do this!

Key Lessons on Trading Safely

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You’ll have to watch the full video to see my detailed examples and trade reviews. Here are the main points I want you to pay attention to while I explain my thought process:

  • When and how to lock in profits on failed breakouts…
  • Why you can’t trust sub-penny stocks…
  • Understand that small losses are part of the process…
  • Breakout with no catalyst? Be wary…
  • Why a failure at a key level is a big red flag…
  • When in doubt, get out!

See my full lesson on Profit.ly here.

A lot of people will tell you that I sell too soon and that I’m too safe.

They’re usually right. But that’s how I trade. It’s kept me profitable for over 20 years in the stock market.*

Sometimes I miss out on the big spike because I’m out too early. That’s OK. I’d rather take a small profit and be early than hold and get crushed.

You must think about what could happen if you’re wrong. That’s what the promoters and Twitter pumpers aren’t telling you…

Why You Should NEVER Hold and Hope

Check out the chart for Infrax Systems, Inc. (OTCPK: IFXY) below. A lot of chart purists were hyping this as a swing trade over the weekend.

I didn’t hold it overnight, but I did trade IFXY Monday morning.* I was warning traders about the dangers of a sketchy weekend hold.

Maybe earlier this year I would have felt better about it. But in this slow market, a breakout without a catalyst is a recipe for disaster. I was nervous about the possibilities come Monday morning.

Sure enough, look what happened … Monday started with a big red candle. It dumped the price all the way back to noon trading levels from the day before.

IFXY stock chart
IFXY chart, 2-days, 1-minute candles (Source: StocksToTrade.com)

This is a perfect example of why you need to stay skeptical. These are sketchy penny stocks.

Sure, you can potentially profit in this choppier market — if you learn the right lessons and trade scared. Always remember what you’re buying. Don’t fall in love with junk stocks.

Take the single or cut the loss and move on.

My goal is to maximize profits AND stay safe. So I don’t waste my time on bad setups. I recommend you do the same.

Learn from this lesson and choose your level of commitment to your education on Profit.ly.

Ready for the ultimate education in penny stocks? Apply for the Trading Challenge.

Comment below to share how you’ll trade conservatively and protect profits. Tell me your plan. I want to see that you’re learning.


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*Results are not typical. Always do your own research as trading is inherently risky. You should not mirror the trades or alerts of the instructors and attempts to do so may result in substantial financial loss. Past performance is not an indicator of future results.

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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”