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How To Turn $1,000 Into $3.3M Short Selling Penny Stocks

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Written by Timothy Sykes
Updated 1/24/2023 3 min read

No joke, this is an email I got the other day, the name and ticker has been deleted to protect the guy from getting his ass beaten:

hi tim, i have been wondering about short selling penny stocks forever and to me it makes complete sense. i just came across an article “How To Short Sell Pumped Up Penny Stocks” on yahoo.com via tradingmarkets.com and came across your name.

this is what i had in mind…as this example is a public stock that a group of friends on mine started up

stocker ticker: XXXX
issued at 2 dollars a share on 9/05/2007
currently trades at 0.0006 (july 24 2007)

lets say i shorted 500 shares of this stock on 9/05/2007{1000 dollar initial investment)

For the next few days i decide to buy my stock(get out of it) at an average price of .0006 cents a share.

The question i have to ask for you, would my profit from beginning til now be roughly 3.3 million.

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This is my reasoning. I sold 500 shares at 2 dollars and its now worth .0006 cents a share. It has lost a value of 3333 times its initial value (which is good for me because i shorted the stock). So i took that 3333 and multiplied it by my initial investment of 1k. Now is my logic correct and did i just make 3.3 million in this hypotheticl but real life scenerio?

Wow. WTF kind of f$%^&ed up up thinking is this? Does that mean you can make $6.6 million off a $2,000 investment? Screw it, maybe you wanna make $33 million off a $10,000 investment? Hell, why do we even need to stick to any mathematical rules whatsoever–you should be able to turn $1 into $1 billion through short selling penny stocks, right? Sure, why not!

When I say the world knows sooooooooooooo little about short selling, let alone short selling penny stocks, this is what I’m talking about. You cannot imagine how friggin confused/uneducated/dumb people there are–it’s not all their fault–much of it is due to the trading “teachers”/”coaches” being uniformly fraudulent/incompetent and the fact that some people just aren’t meant to have any money whatsoever.

People please get my PennyStocking DVD package, it’s been known to prevent cases like the one listed above.

For the record, in order to calculate one’s short selling profits, you take entry price (the price at which you short sell your shares) minus your exit price (the price at which you buy to cover) multiplied by the number of shares you have…so in this case, it’d be $2 – $.0006 x 500 shares = $999.70 and then you pay some commissions. It’s a great little strategy, but it’ll take lots of pumps and dumps to turn a few thousand into a few million…

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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”