37 Key Points Of My Successful Trading Philosophy

Posted by timothysykes on Mon 17th of Mar, 2008 10:59:24 AM

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wedding 37 Key Points Of My Successful Trading Philosophy

Since the vast majority of emails I’ve gotten recently have come from people who are unwilling to read through all my blog posts, too poor/cheap to afford my DVD or too lazy to pick up my book to better understand my strategies, this is the post that’s gonna make everything real simple-like. Learning and profiting over the past decade, here’s what I’ve come to believe (in no specific order)

1. I love, use and recommend Thinkorswim as my broker. Yes, I get compensated for referring people, but I’d never endorse a product I didn’t use myself—best customer service, great tools, negligible commissions and great borrows on hard-to-borrow stocks I love shorting—all the way down to the $1-2 range, yes you CAN short under $5 (there’s no SEC rule against it, some brokers just suck)

2. The vast majority of investments and trends are unpredictable, be choosy

3. So, I stay fully liquid the vast majority of the time, constantly stalking potential prey

4. Every day it’s just random market noise, the best plays come about rarely, anywhere from 1-5 per month, focus on these and your odds of success go waaaaaaaay up

5. I don’t care whether the stock market goes up or down, as long as there’s volatility

6. Since Wall Street is so full of idiots and many companies will fail, Short Selling, or betting a stock will drop in price, is a very useful strategy and my specialty

7. Diversified long-term investing might work, but it can NEVER lead to my kind of gains—even with all my mistakes, 60 times my original investment, after 40%-taxes and hella fun spending a few hundred grand, in 9 years

8. There are specific points/prices during which the odds of predictability can be in your favor, that is when to enter a trade

9. These windows of opportunity are created by market mechanisms like hype (short squeezes), manipulation (very clean charts), stop losses (getting taken out), volume (how many day traders are involved)—that’s why I write about that instead of more mainstream but less useful crap like earnings (varying expectations, can easily be fudged), industry potential (complex/unpredictable) and profit margin trends/product popularity (have fun researching for months)

10. I play stocks, not companies, companies and their stocks are two separate beings entirely

11. I aim to make 50 cents to $2/share, usually 10-20% gains within minutes, hours or days, as I’ve found those sized gains to be the most predictable

12. I take my gains quickly, if the pattern continues, I can always re-enter (lesser so due to the ridiculously anti-American pattern day trading rule)

13. I take my losses quickly (I’ve obviously been wrong, can’t risk being big-time wrong…ever)

14. There is a correlation between the economy and stock prices, but the time lags involved make it irrelevant for trading

15. There is a correlation between business and stock performance, but the time lags involved make it irrelevant for trading

16. I stick to stocks because that’s where all my experience/success is

17. I stick to the short-term because it’s less complex and more predictable

18. I stick to microcrap and smallcrap stocks because they are the most affordable/volatile/inefficient/predictable

19. Microcraps and smallcrap stocks have unique qualities—such as paid for research reports and low dollar volume traded, making this niche ideal for small-time investors and traders

20. Microcraps and smallcrap stocks continually need to raise $, they will forever be hyping themselves up

21. Microcraps and smallcrap companies usually fail. Probable hype + probable failure= Probable profits from shorting into that hype

22. Stick to stocks in play, filled with plenty of fickle day traders, great for quick surges and reversals

23. Never account for more than a few percent of daily trading volume

24. I should go both long and short but I’ve done too much research for my own good so I have problems buying crap companies because I know how bad they are

25. I have good theories, but I am not a great trader/timer (exemplified by THIS trade (stock is now 44% lower one trading day later!)

26. Since I know I’m a bad timer, I stick to volatile stocks—think 30-300% daily moves—their large moves leave plenty of room for error

27. I don’t use leverage because no matter how sure I am, it risks disaster

28. I trust nobody and no company, better safe than sorry

29. “Gurus” and “market experts” are liars, frauds and marketers–I’m a marketer because a.) it’s gonna be fun to see if my strategy can create another millionaire b.) the lack of scalability of my strategy make it a waste of time for me to keep it to myself–call me greedy, but I think I can make more cutting through all the BS out there and helping traders not lose $, for once and c.) thanks to the combo effect of boring/uncreative finance people and my big mouth, ain’t nobody else willing to say what’s needed to get EVERYONE to understand this stuff!

30. The financial media is comparable to the WWF, which is good, you can profit off of the suckers who believe what they hear from these entertainers (Cramer is The Rock)

31. There’s far more idiocy and corruption on Wall Street than you ever imagined, which is good, you can profit from it

32. Many people are smarter and better informed than me, I don’t want to compete with them (these guys make big money so they stay out of my penny stock niche, whewww!)

33. Without using leverage or taking on ridiculous risk, my strategy can only yield a few hundred thousand to a few million in profits per year, respect these limitations. (And that’s if there are enough opportunities, some years I might only make tens of thousands (especially with TIM under $25k))

34. Random stock picks are useless, even when proven correct—if you want random gut-based bets, go to the casino, there you’ll at least get free drinks

35. The key to long-term success is profiting from predictable patterns rooted in human nature

36. I make solid profits over time by being right 60-70% of the time

37. Patterns mutate, but the awesome Supernova (as detailed extensively in my DVD)—from which I’ve made nearly all my money, both from the long and short side—remains more or less the same

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Related Reading

Why SmallCap Stocks Rock: Logarithmic vs. Linear Charts April 7, 2008
The Answer To The Question I Get Asked Most Frequently August 30, 2008
Why I Trade With So Little Money (Like A Poor Person) May 9, 2009

Andrew

Hey Tim, what broker were you using on Wall Street Warriors? It wasn't TOS was it?

timsykes

nah it was carlintrader, who cleared through goldman. def. a great software, but bigger minimums to get setup

eric

Tim...Such an awesome post. As a rookie trader, this kind of post was exactly what I was looking for! I like learning what makes you a successful trader and I like picking your brain apart! Many thanks always!

eric

I think WSW is a little boring this season? I dont know what to think about those salesman except that I would definitely NOT give them my money. Brett, on the other hand, is loaded as hell.

timsykes

yah it was boring, and who knows with Brett, such a lack of transparency in the industry, he probly makes a hige six figures, but def not guaranteed 7 figures. everything he has is rented/leased

timsykes

just twittered:

"Holy intraday collapsing finance firms LEH, MF, GFIG, IBKR batman!"

a shame to waste such volatility but they're pure news plays, aka too unpredictable, even intraday

http://twitter.com/timothysykes

Short lover

"I aim to make 50 cents to $2/share, usually 10-20% gains within minutes, hours or days, as I

timsykes

Nope, I stick to smallcraps and microcraps, while the charts might look the same on days like this, companies like LEH are big and complex and so the inefficiencies I aim to profit from--namely message board/stock promoter/naive investor/day trader hype--aren't present, you're competing with company or industry news that can break at any second, bigtime traders, bigtime funds, a whole different game, you can certainly win big, but i've learned to control my temptations...

JJ

Tim- you know this would be a good cut + paste to your forums. by far the best true advice out there. thanks!

noobtrader.08

8. There are specific points/prices during which the odds of predictability can be in your favor, that is when to enter a trade

What are these specific points/prices?

TIM Sykes

such as when a stock thats up 100% on hype starts fading and crosses some big fat round number like $5--probly lots of stop losses there, they all try to sell immediately but they push the price down bigtime and as a short seller, all u gotta do is ride the wave of computer generated orders and u can make 30-80 cents/share, sometimes $1+

noobtrader.08

ic.

i appreciate the metaphor of "riding the wave..." but in terms of CPU orders, and I recall you mentioning this in your book too, how do I track these orders?

noobtrader.08

also, and this is the only time I'll do this, I have to apologize for asking "elementary" type questions... I know you're a busy guy... I am at an infancy stage right now, but with TIMe "Simon Cowel" Sykes in my corner, I'll do you proud (and myself of course).

Cheers,

TIM Sykes

there are no bad questions, as long as u post the here so everyone can see...u never know where exactly all the stops are, u just know that thanks to all the finance books people read, everyone uses them and they're not bright enough to put them at $5.03 to beat the crowd at $5...big fat round numbers work and then u dont know for how long cuz u dont know how any stop loss orders there are, u just ride the wave until it breaks

TIM Sykes

just reread this post, god damn its good!

eldanio85

Tim, I spoke with you when you visited the University of Minnesota, I was the guy that asked you if you used technical indicators at all. Have you ever back tested your trades just using MACD and fast stoi? I think you would be impressed by how much better margins you could make on your trades just by following these methods. Also, one technique that I have found very helpful is drawing intraday price channel trendlines, just make as many channels as you can find correlating peaks and troughs and once you get a negative channel started then you can short the stock (in my case buy puts) and wait until the stock breaks the upper boundary of the channel before covering (selling to close). Another thing that I find incredibly useful is Japanese candlestick charting. It takes a while to become proficient at but I am sure that at the end of the day it wouldn't hurt to just back test your strategies on your laptop while you are taking a poop or something and have nothing better to do than look at the floral wallpaper. I realize that you feel that technical indicators are simply self-fulfilling but many of the traders that are involved in the stocks that you cover are not the best chartists around, I doubt they are the best of anything and I believe that bolstering your arsenal in any way will lead to success in the long run. You make many trades and if you can even better your strategy by making an additional 1% on every trade and limiting your losses by an additional 1% you will realize a much greater chance of immense success. I have an additional question, you are currently managing a portfolio that is around 18k and due to the fact that the sec limits portfolios less than 25 k you can not flip stocks rampantly as you have done in the past, have you considered opening up an additional portfolio and just put like 30k into it so you can continue to make many trades or do you find yourself to be too busy now with your book and website?

Thanks Tim
El Danio

eldanio85

Tim, I think it would make sense if you changed the site so the most recent posts were featured at the top of the list instead of at the bottom in order to make them more visible. Thanks

timothysykes

i went back to under 25k to show how ridiculous this rule is, i didnt check myself into prison just to enjoy the benefits of life outside bars.

never computer backtested, maybe somebody smarter will do it--gotta remember everyone playing these stocks are idiots so advanced stuff probly wont work.

ShootSteel

Great information

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Who Is Timothy Sykes And Why Should I Care?

See Tim's full bio HERE. Tim turned a few thousand dollars into a few million by taking small gains time after time on hundreds of volatile penny stocks, discovering that his trading strategy, while consistently successful, works best for those with smaller accounts.

Determined to teach others this PennyStocking trading strategy (learn more HERE), he went back to his original $12,415 roots (already $58,000+ even though the stock market has crashed) to show everyone how to turn thousands into millions, even while having a life (somewhat) and making plenty of mistakes. Currently he is the #1 ranked trader out of 25,000+ on Covestor)

How Can I Consistently Make Money In The Stock Market?

Hard work, Determination and Know How.

Hard work to learn how the greatly misunderstood niche of penny stocks provides opportunities every now and then on which you should pounce.

Determination to seek those probable profits out and know how in order to actually profit from them.

Long story short, wait for stocks that are extremely volatile - for whatever reason - and then aim to take small profits (between 10 and 50% within a few hours, days or weeks) here and there, either from betting on higher or lower prices (yes, you can make $ betting on lower prices, it's called Shortstocking (learn more HERE).

Why Penny Stocks?

As Tim explains in several ALL-NEW instructional DVDs (see them HERE) and in over 2000+ blog posts, penny stocks are the most hyped and corrupt niche in the entire investment world. These two qualities make them the easiest to profit from (legally) because the vast majority of people who play penny stocks are suckers and all-around ignorant people. If you have any intelligence whatsoever, you have a clear advantage and it's like playing basketball against mental midgets.

Where Do You Find Stocks To Trade?

This is the #1 FAQ (see more HERE) and it is answered in THIS instructional DVD.

Of course, that's just a brief introduction - to receive a full education, there is Tim's book An American Hedge Fund which is the story of his remarkable rise and lessons learned.

To truly increase your odds at profit, Tim has designed an entire set of detailed instructional DVDs, covering all the variables that amount to over 24 hours of instruction (see them all HERE)!

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TIM Trades

View All

Date	Stock	Buy	Sell	Net
Nov 6	QXM	$4.31	$4.80	$1936
Nov 4	COT	$8.66	$8.88	$642
Nov 4	QXM	$4.61	$4.89	$822
Oct 30	DDRX	$25.70	$26.53	$812
Oct 29	CTDC	$4.00	$4.42	$781
Oct 26	AWSL	$3.24	$4.10	$2516
Oct 23	RODM	$5.27	$5.23	$301
Oct 22	AMLM	$2.69	$2.97	$820
Oct 22	USEG	$6.12	$6.09	$85
Oct 20	CBOU	$8.93	$9.06	$243
Oct 16	VRMLQ	$16.79	$18.65	$2773
Oct 13	YONG	$11.05	$11.66	$1202
Oct 13	NPHC	$0.59	$0.71	$583
Oct 12	IMGG	$0.60	$0.70	$682
Oct 9	ZAGG	$5.50	$6.10	$2380
Oct 7	GVBP	$0.03	$0.27	$702
Oct 1	NPHC	$0.70	$0.85	$1482

Total: $92,304 (644%)