This chapter starts out back into the powerpoint presentation mode by Tim. Which is much preferred to me versus the webinar format. The webinar was useful for live trading and live Level2, but just too distracting. Sykes briefly reviews the $TCCO trade and the webinar then moves back into the pre prepared curriculum.
Another reminder to not just trade news, or earnings or contracts or any fundamental indicator. Only trade these events if the stock is moving. Review of this from previous chapters but it is an important concept. You can waste hours and days trying to trade news that is not moving the stock NOW. First reference (that I can remember) of the snipers code of “Aim small, miss small”. In penny stocks and really any volatile stock there is nothing wrong with catching the meat of the move. If you try and get the whole move, you will experience way to much anguish and ultimately probably end up with a smaller profit than you would have had you taken the quick profit around a certain catalyst and saved the time and energy to look for the next trade.
Tim next goes into a breakdown of a daily routine. I’m kind of a “daily routine nerd” but I think this segment is useful for any trader. It all starts with getting up early and scanning and getting a feel of what is moving and what happened overnight. Also very solid lessons in trying to avoid trading mid day. I will often have trades on during the lull but fight always to not add nor take any new positions between 11-2. Spend this time doing other things, Sykes suggests this as well. Workout, research, run errands or just scan and write plans. I would also add it’s a great time to take a nap or a walk! You can set alerts on your platform and just rest up from the busy morning and get fresh for the busy afternoon. Rest and sleep are often so overlooked in trading. You need tons of discipline and its been proven over and over again one of the single biggest ways to increase your discipline is by increasing or improving your sleep.
Tim jumps back into more scanning and watchlist building, very useful for a new trader. Again a big oversight by newer traders is trying to be a “gunslinger” and just nail trades all over the place. I believe and Sykes confirms in this segment, you need to plan and pick the best stocks to be consistently profitable.
“It’s amazing what a little planning and patience will do.” – Tim Sykes
Last segment of this chapter is an “Introduction to Short Selling”. VERY valuable especially for new traders that may or may not be familiar with selling short. As you get more and more in depth into the world of penny stocks and volatile stocks you will find that some of the most successful traders will be short biased. I have never seen a study or compiled my own statistics, but I simply think that the edge is on the side of the short seller in penny stocks. Sure can you make 300% in a day if you buy the dead bottom and sell the dead top of a POS $1-$4 runner? Sure. But I am much more comfortable and prefer the odds of shorting that same stock when it goes from $3.50 to $2.00.
Tim gives lots of examples of short setups and recaps several trades. There are also some interesting stories about the shady side of penny stocks including a funny penny stock front of a bakery shop. While not necessarily educational I had never heard this story and it was pretty comical.
Overall a very good chapter and high in value for traders that are just getting their feet wet in short selling. Shorting is a difficult concept to explain to a newbie and I think Tim does a solid job of it.
Rating: 4 out of 5 (Good content with some amusing stories, but on topic and focused)
Wrap-up of TCCO from webinar
Better recap vs the webinar, good stuff here
Back to slide deck and more “conventional” presentation
Don’t just trade news, need news AND technicals/price action
Don’t scalp, but you can miss small, aim small miss small, but look for “big gains”
Interesting how the “best” trades line up with all the rules/framework
-I’ve seen this myself with my own rules and setups
Get up early and start looking to scan
-use chat rooms
-find whats moving
-check on recent big movers
-set breakout/breakdown levels on these big movers
Sykes focuses on trading in the afternoon
-I prefer to put on “starter” entries in the morning then add/get more aggressive in the afternoon
Avoid mid day – VERY MUCH AGREE
Like the detail hour by hour of Sykes daily routine.
“It;s amazing what a little planning and patience will do”
Create a watchlist organization method, by sector or by price etc. All platforms have a way to run through them. stay organized
Prioritize the most volatile stocks, earnings winners, contract winners
—Intro to short selling
-What is short selling
-Funny graphic trying to explain shorting
-Short selling is the opposite of buying, sell first short later
Short selling terms
SSR – explanation – uptick rule
Forced buy ins
Introduction to hassle of finding borrows to short.
always be looking for shares to short
-Good to Zero – holding a stock short until it goes to zero
Stop loss surfing
-Shorting is great into whole and half dollar amounts where longs stops are set then they get pulled.
A stop loss does not guarantee your execution
Shorting involves borrowing, which means you can be liquidated any time.
Need to pay interstate on borrows.
Need the right broker to short
-Usually not the big name online brokers
-Need multiple brokers to find borrows
Shorting junk companies is repeatable and consistent.
Commision are mostly negliblle if you are making the right trades.
Commision are not a concern if you make good trades. Routing is pointless waste of time good for fractions of pennies/scalping.
Shorting is inverse sell then buy.
Tough to get a short to go to zero, need to just catch the meat of the move.
Shorting is high percentage, if you have the right entry. Most penny stocks are caracases
In penny stocks the prices of the ticker do not reflect true businesses.
Good breakdown of how promotions work.
NXTH good example of a promotion up every day.
Hard copy mailers
Contracts can be shady
Good recap and explanation of NXTH
Stop losses are tough on pump and dumps on the long side, need to take profits quickly.
NO good risk for buying pump and dumps longterm.
Promotions never end well.
Pumps can go long than you think. Tough to short long term.
LEXG classic pump and dump from past
JAMN another classic
WLOC – recap huge pulls
Why do crashes happen?
-Promotions are created to get the stock price up so insiders can sell into it.
Funny pastry shop front to a penny stock – new story for me.
Shorting pump and dumps can be “gimmies” – but not many pump and dumps promotions around anymore.
Recaps of a lot of pump and dumps.
How to get shorts on IB
Part of shorting successfully is having the right broker and being prepared and ready.
Best shorts are supernova’s or dead pump bounces.
Match trades – definition
Lots of charts of supernova’s/parabolics
7 step framework – breakdown/explanation
-more applicable to pump and dumps – old
How to break down a mailer and disclaimers
Female wolf of wall street story – interesting