timothy sykes logo

Trading Tips-Tim Sykes Penny Stock

You’re In The Trade, Now What?

Timothy SykesAvatar
Written by Timothy Sykes
Updated 7/3/2023 6 min read

I was profiled on Business Insider over the weekend:

Source: Business Insider

In the interview, I discuss the components of my Trader Checklist and how I use it to make better trading decisions.

If, for whatever reason, you’re having difficulty reading the BI piece, I recently wrote about how I use the Trader Checklist Calculator to analyze setups…which can be found in this blog post here. 

Today, I want to take it to the next level. And that’s talk about what happens once you’re in the trade.

More specifically, how to manage risk.

You see, at the beginning of your journey, it’s all about capital preservation.

The chances of you making money in the markets immediately are extremely slim.

That’s why risk management is so CRITICAL while you’re studying.

Here are six of my top risk management rules.

 

Rule #1: Cut Losses Quickly

© Millionaire Media, LLC

Many of my top millionaire traders don’t trade like I do. Some of them, like Mark Croock, have become excellent options traders…others like Matt Monaco, have dipped into cryptocurrencies…and then you have a handful focusing on short-selling.

I bring this up because finding your niche in the market takes time.

You’ll have to experiment and try new things. And in the beginning…EVERYTHING is new.

Instead of focusing on making money…a better goal is to focus on learning.

And when it comes to your trading…you must cut losses quickly.

In my opinion, it is one of the best ways to survive.

I’ve been consistently profitable for decades and amassed millions in trading profits…it wouldn’t be possible if I didn’t follow my number one rule.

Rule #2: Aim For Singles

© Millionaire Media, LLC

If I cut losses quickly, I don’t need big winners to stay profitable.  I often want to capture 5% to 20% on my trades.

Rinse and repeat.

From my experience, small winners add up.

Is this style of trading sexy?

Absolutely not.

But it’s hard to argue with the results.

Rule #3: Don’t Fall In Love With A Trade

© Millionaire Media, LLC

Penny stock promoters make people believe these companies will change the world and that investing in these stocks is like getting in on the ground floor of Amazon or Nvidia.

GET REAL.

The majority of these companies are absolutely trash.

They usually want to pump the stock up to make an offering to raise capital. They raise capital, diluting shareholders, and the average investor is left holding the bag.

That’s why  I never look at these stocks as investments.

They are purely speculative short-term trades.

And while I’m an optimist. When it comes to trading penny stocks, I expect the worst out of them.

Rule #4: Don’t Use Stop Orders

how to read earnings reports why traders look at earnings announcements
© Millionaire Media, LLC

I am not a fan of stop orders.

Why?

Because the stocks I trade are volatile.

You can set a stop and get filled several levels below it.

The slippage can be absolutely nuts.

I would rather sit, watch, and manage the trade while being present.

Of course, I am always traveling, which makes trading slightly more challenging.

But if I know I have to hop on a plane or know I will be in an area with no WiFi…I will bail from the trade.

If you’re going to trade…be present.

Don’t rely on stop-loss orders to manage risk, you’re likely to be disappointed.

Rule #5: Don’t Be A Scalper

The world is a beautiful place.

Why would you want to be in front of your screen all day, scalping for a few pennies?

On most days, I will take 1-3 trades.

But I know some traders will take 10-15.

It’s crazy.

There aren’t that many good opportunities out there.

And scalping can create some horrible habits and outcomes like:

  • Overtrading
  • Decision fatigue
  • Getting triggered after a loss
  • Revenge trading

I’ve always found it best to focus on A+ setups like my Weekend Strategy.

Last Word

© Millionaire Media, LLC

Trading can be extremely overwhelming in the beginning.

But remember, you are in control.

I suggest easing into your learning experience.

If you want to avoid some of the biggest and costliest mistakes newbie traders make, I highly suggest you check out this video. 


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

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

* 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”