timothy-sykesTim Sykes took his $12k Bar Mitzvah money, turned it into $100k by his senior year at high school and  was at almost $1 million by his freshman year at college. He did this through trading Penny Stocks and has been trading them ever since. His account is now over $4 million 20 years later.

Tim’s famous for one of his top students turning $1,500 into a Million and has also appeared on Larry King and Steve Harvey. Tim also runs Profit.ly, an educational community that aims to help improve your trading.

In the show Tim reveals:

  • His original Penny Stock trading strategy
  • How you can tell if a Penny Stock is a scam
  • What time of day to stay out of the market
  • What happens overnight with Penny Stocks
  • His new “Trader Checklist by Tim Sykes”
  • Why he trades like a castrated choir boy

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42: Timothy Sykes on "Trading Like a Coward" & How to Avoid Penny Stock Scams | @timothysykes
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Recommended Book

Reminisces of a Stock Operator by Edwin Lefevre

Interview Links

Key Insights

General

  • Trading is about discipline, process and perseverance
  • With Penny Stocks you’re never going to find the next Microsoft, instead look for hot Penny Stocks that are in play and piggy back the move up or down
  • US Penny Stocks are the most volatile and active
  • Cut losses quickly
  • News around Penny Stocks takes a little while (a few days) to digest as it’s not a very followed niche
  • If a stock is up 20-50% on the day, it may go up 30-100% the next day
  • There are scams that you can get on the back of if the “Jordan Belfort’s” of the world have gotten out and stopped promoting it; it’ll fall off the cliff again in 1-2 days
  • With Penny Stocks all the excitement happens overnight and you’ll find massive spikes right when the market opens
  • There are thousands of Penny Stocks and the vast majority don’t have any price action or volume, but just a story
  • Focus on price action and not stories
  • Tim uses his new “Stocks to Trade” software to filter out the stocks to focus on (it includes 40 different pre-set scans)
  • It’s all about adapting if your first strategy or attempt at trading doesn’t work out
  • There’s potential in “low flow” plays that have huge volume
  • Focus on market inefficiencies
  • Read the SEC filings to work out if a company is a scam, they basically admit what they are doing. Ignore the press releases which are full of hype.
  • Be grateful for every single profit regardless of the size
  • Start off trading small sizes so you’re not too worried about the money

Tim’s Trading

  • He’s entirely self-taught. His main strategy when he started out was buying hot penny stocks that were hitting new highs at about 3:58pm right before market close and selling them the next morning into a gap up. Unbeknownst to him overnight Penny Stock promoters were calling people and pitching these stocks and if they were successful then whoever they called would be putting in buy orders at the market open the next day. These Penny Stock promoters were all busted in 2001. After this time he moved to short selling failed breakouts at the same time and wait for the morning panic when the breakout failed (these stocks could drop 30-70% inside an hour)
  • He uses eTrade and Interactive Brokers to trade Penny Stocks
  • He shows all of his trades publically online (about 18 years’ worth)
  • His winning percentage is about 73-4%
  • He looks for “hot stocks” that are up 20-50% on the day with good (meaningful) news, e.g. good earnings or a licensing deal with a bigger company
  • Check out TOPS on 21st July 2016 to see the trade Tim is referring to in the show
  • His risk to reward is usually 1:3 but can be upwards of 1:10
  • His typical trades run for a few hours or overnight.
  • He trades during the morning session, but not midday because it’s a little less volatile and in the afternoon he’ll try and position his stocks that held their gains well with an aim to hold them into the morning spike the next day
  • He uses prior highs to work out if the stock will break it, if it doesn’t he’s out. Same goes with short trades.
  • He looks at volume to give him confidence in a trade
  • He’s working on a new DVD called “Traders Checklist” where he’ll put his strategies into a formula and grade every single stock based on a few different indicators
  • He’s trades like a castrated choir boy, a coward… “I trade scared so I’m not scared to trade”

Tim’s Strategy

tops

  • Look for low priced penny stocks that are big percent gainers and put them on your watch list
  • See if they can hold their gains over the course of the day
  • If they are closing close to their day high, target the day’s high and anticipate a possible breakout
  • If it doesn’t breakout and double tops you still have a profit
  • Keep your stop at the next significant level below

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES, OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM, WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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Forex, futures and options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Our website, product contents, and materials are neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our website or in any materials. The past performance of any trading system or methodology is not necessarily indicative of future results. Substantial risk is involved. Forex trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the Forex markets.

Don't trade with money you can't afford to lose. Nothing in our course or any materials or website(s) shall be deemed a solicitation or an offer to Buy/sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of futures results. Trading involves high risks and you can lose a lot of money.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.