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Penny Stock Basics

How to Spot Stock Plays Like a Pro

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Written by Timothy Sykes
Updated 1/26/2023 18 min read

People keep asking how I spot my trades so quickly. When I nail the bottom dip-buying into a morning panic, it looks like I’m some kind of stock-picking genius. At least to the uneducated observer.

First, I don’t nail every opportunity. I misjudge sometimes — that’s part of trading. But it’s not rocket science. It really comes down to a few very basic ideas. I could say it in six words…

… tools, education, patterns, rules, patience, and dedication.

Here’s my reason for putting tools first: If you have the right tools it can help with your education. When you ask how I’m spotting trades … this is how. I use the right tools. Use the right tools, and you won’t wonder. You’ll see it because you have access to the tools. Simple.

Before I tell you about the tools — the best education I can offer is the Trading Challenge. All my top students are members. Apply today.

Here’s how I used to spot stock plays…

The Old Way to Pick Stocks

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You can still do it the old way. Each day, find the highest percent gainers priced under $10. Find those with news catalysts, good trading volume, and enough trades so you know it’s moving. That’s a good place to start.

Let’s say you decide to go this route. Here’s what you’re in for…

  • One hour to check different websites to find the biggest percent gainers.
  • One or two hours hunting down news catalysts and searching SEC filings.
  • Another hour or two studying the charts to determine support and resistance, past behavior, and possible trades.

That’s a conservative time estimate for new traders. Most of the websites you’ll search don’t even have information about low-priced stocks. Yes, you can learn to do this faster, but that requires experience. Even once you’re experienced it takes time.

Let’s say, hypothetically, you’ve done your research. You’re ready. So, then you go to your broker’s trading platform only to discover…

Bad Brokers and Bad Software Are a Recipe for Disaster

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Stop wasting your time with bad brokers. I hear this all the time: “I tried using thinkorswim. I didn’t get filled.” That’s because thinkorswim was acquired by TD Ameritrade, and I don’t find their execution to be ideal … just my opinion.

If you’re nickel-and-diming it by going for the cheapest broker, you’re throwing money down the toilet. You pay for what you get.

You want good executions? Pay a little more for your broker. That $5 or $10 you save on commission going with the cheap broker could cost you hundreds due to bad execution. Possibly more.

Bad Brokers Don’t Have Data

Here’s another one I hear from Robinhood users: “Oh, I don’t even see these stocks.” Yeah, no duh. Because Robinhood, in my opinion, also isn’t ideal for my needs. There are others where you can’t get the data you need for these stocks.

I use Interactive Brokers and E-Trade, by the way. I like to think of them as the least-bad brokers. Your goal with a broker is to be able to get your orders filled. Pay the commissions. It’s worth it if you need to get in and out of trades fast. Which you do.

And I don’t get paid to promote brokers. This comes up sometimes. The brokers hate me because I don’t trade enough. They hate me more because I teach my students to not over-trade.

Pay attention: I’m here to help you. I’m not necessarily your friend. I’m your mentor, OK? If you’re offended by me, go somewhere else. Come back when you’ve blown up your account because you ignore good advice, or worse, follow bad advice.

Here’s a better alternative…

StocksToTrade: The New Way to Pick Stocks

If you’re already a student and you’re not yet using StocksToTrade: Please use StocksToTrade. Use it every single day. It’s my blunt and transparent answer to the question.

More Breaking News

Designed by Traders for Traders

We designed StocksToTrade for you. We designed it to help you. It has all my favorite scans built in. And you can create your own scans. StocksToTrade lead trainer Tim Bohen has scans you can upload when you watch the weekly webinars. Plus, he teaches you how to create custom scans as part of the 14-lesson introductory course.

I urge you to use StocksToTrade because it can save you time in the learning process. It doesn’t mean you won’t need to study. You will — a lot. StocksToTrade lets you focus on patterns and setups.

It gives you the opportunity to practice trading in real-time. And your paper trade orders are matched with real orders. It’s the closest to real trading you’ll find anywhere. Make no mistake, it’s not only for practice trading. It’s the one stock screener to rule them all.

Before I go any further…

Crushing the Conspiracy Theories

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There are a couple of conspiracy theories floating around. Frankly, I shouldn’t even give them the time of day. But they pop up on message boards or comments every once in a while, and I’m sick of it. I’m crushing them here and now. They’re complete BS.

Conspiracy Theory #1: Tim tells his students when to buy and sell, and their actions change the price of stocks. Tim benefits when his students lose by following his trades.

Seriously?

Can you imagine what would happen if all my students followed my trades? If I actually managed to pump a stock’s price and then dumped so my students lost … I’d put myself out of business. I teach my students to spot pump and dumps so they don’t get scammed. More about my alerts for students later in this post.

Conspiracy Theory #2: “You only push StocksToTrade because you want more money.”

What? WRONG!

StocksToTrade is the tool I wish I had when I was learning. And it’s the tool I’m grateful to have now. Our entire goal with StocksToTrade is to provide you with the best tool possible. How long do you think it would last if I was just trying to take your money? Not very long, I assure you.

Data Costs Money

I don’t think people understand how much data costs…

I’ve had people ask why it costs more for a Level 2 data subscription…

It’s because Level 2 data costs us more! It’s pretty simple. Our cost basis for StocksToTrade is high. It’s not about making a bunch of money. It’s about you. It’s about giving you the tools to succeed.

I Win When You Win

I’ve designed everything around how to create successful students. My entire business is more successful when I create more successful students. And I’m happier.

It’s about you. It’s not about this conspiracy-theory BS. It does me no good if I make money on a trade and nobody else does.

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How many students do you think would stick around if I was pumping stocks and they lost money on the play?

When you watch my DVDs I explain it all in very simple terms, but let me just clarify: If I trade 10,000 shares of a stock that trades 2 million shares a day…

… it’s not possible for me to affect the stock price.

Perhaps more importantly: I don’t recommend you or anyone trade from my alerts.

My Alerts Are For Education, NOT to Chase Trades

Don’t Follow Anyone’s Trades

I don’t want you to follow any of my trades. I don’t want you to follow any of my alerts. In other chat rooms, there’s a follow-the-leader mentality. They just mention a ticker and everyone tries to buy.

That’s disgusting.

I don’t want my students to follow me into trades.

I write out my trade descriptions because I want you to learn my mindset. I want you to learn my process. I want you to use StocksToTrade because it’s the right tool. I want you to become self-sufficient.

My top students are all self-sufficient. They don’t need me. They don’t need my process anymore. They’ve developed their own process … but it takes several years.

Let me clarify in case you skipped over that last part: It takes several years.

Beware of Scammers and Charlatans

Once you get in my chat room you’ll realize it’s different. It’s not a case of I buy, everyone else in the chat room buys, and then I sell. There are chat rooms like that. A lot of them.

There are a lot of fakes teaching these days. Ask whoever’s trying to teach you for all their trading details, not just profit and loss. A screenshot showing how they made $50,000 doesn’t mean anything. Show me everything.

How much did they risk? If they’re risking $300,000 to make $100,000 … that’s irrelevant to 99% of students. Some of these idiots are using up to $700,000 on a trade. They risk losing $50,000 to $100,000! Then they make $20,000 and it looks great because they post their screenshot.

Ask for every single detail. You need to see it. You have to dig in — be rude about it. There’s no room for dishonesty in this game. The reason that somewhere around 90% of traders lose is lack of preparation.

That’s why I started teaching. And I’m not gonna do it politely. I teach in my own way, and it offends some people. I could probably have more students if I was more polite. But it’s not about quantity, it’s about quality.

What I teach is to help protect you and make you self-sufficient…

Patterns and Rules to Keep You Safe

I teach several patterns. You choose what patterns you like. (And adapt to the market — because it changes.) You’ll figure it out over time, but it’s going to take time. Tim Grittani made nothing for nine months, even while studying.

Choose and Master Your Patterns.

Use StocksToTrade. Then focus on dip-buys, morning panics (my specialty), or possibly shorting morning spikes. That’s been working for some people — experienced traders. Newbies shouldn’t short. Period. My students Mark Croock and Tim Grittani report that they’re shorting nicely, but remember, they’ve been doing this a long time.

There are other patterns, as well, but it all takes time. And you can’t learn every pattern at once. The smart students pick one or two and master them.

Stay In the Game: Risk Management

Your number-one priority at the beginning is to protect your trading capital. That means learning to cut losses quickly. Every trade needs to be planned, and you have to stick to the plan. Learn to play by the rules.

Start with StocksToTrade to spot the plays. Then create your plan — which includes using a risk management system. Every. Single. Trade. Stay in the game!

Use the Best Tools Available

Trust me … In the beginning, use the tools I give you. Adopt the mindset I give you. Use the strategies and patterns I teach. It’s in my own best interest to create successful students. Why is this so mind-blowing for people?

Patience Is Key

You need to have patience. Singapore wasn’t built in a day. You won’t build your trading account in a day. You need to acquire knowledge. You need to gain experience when there are hot plays. Sometimes there aren’t any hot plays, so there’s no experience or knowledge to be gained. There’s definitely nothing to be gained from random stocks.

You Will Have To Do Research

“Oh, Tim, I’m watching random stocks today.” You’re learning nothing. NOTHING!

Study the past. I have a whole video lesson library and DVD library of good patterns. I also teach you what NOT to do. But don’t waste time. Don’t waste opportunity not using StocksToTrade or not using the right broker.

StocksToTrade doesn’t do everything for you. But it does put everything at your fingertips — in one place. You will have to do research, you just won’t have to go on some random search that can lead you down a rabbit hole.

You Will Have To Study

I wish I could tell you if you focus on such-and-such pattern and learn a few rules you could get views like this:

 

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How crazy is my view in Singapore? People ask how I can travel all the time and it’s all detailed in the new @completepenny book written by one of my students who combined all my money-making lessons into one book that is an absolute must read (I wrote the foreword!) I’m SO grateful that my most dedicated students are now helping me teach as it’s been an absolutely wild 20+ years since I got started in the stock market and I’m SO grateful for this dream life so I want to pay it forward since nobody guided me in the beginning and I had to learn everything the hard way over the last 2 decades. I don’t want it to take you that long to learn so I’m trying to be the teacher and mentor to you that I never had and it’s working well as I already have 5 millionaire students and dozens of students earning six figures per year with my top student @timgrittani turning just $1,500 of his own money now into over $7 million, EVERY stock trade detailed publicly, including his losses along the way too. I understand there are many fakes who claim success so don’t worry if you’re skeptical, my first millionaire student was actually my first online hater too so I’m willing to teach EVERYONE and my top students and I show EVERY trade we make publicly not just some BS screenshot here or there like too many fakes do. And yes, my education business is booming as it’s good to be real in an industry full of fakes and I’ll tell you that straight up as my realness/bluntness has been key to my success and will be key for your future success too…message me if you want to learn and definitely read the new @completepenny book ASAP! #ilovemyjob #proudteacher #jewswithviews

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Unfortunately, it’s not so easy. So many traders lose due to lack of preparation and improper guidance. So be prepared to study your ass off.

Dedication Requires Consistent Action

I love seeing dedication. But don’t just think it. And don’t say you’re gonna be dedicated and then be lazy. You’ve gotta dig in. Don’t be one of the losers because of lack of preparation.

Use the right tools. Get the right mindset. Learn the right strategies. Get the right teacher.

Tools, education, patterns, rules, patience, and dedication.

How do I spot stock plays? It starts with the right tools. Give yourself the benefit of using proper tools.

There’s an old saying: A person shopping for a drill isn’t buying a drill — they’re buying the holes they can drill with the drill. You want crappy holes? Buy a crappy drill. You want good holes? Buy a quality drill.

StocksToTrade is an incredible tool and it’s what helps me do it. It saves me a ton of time. Wanna take it for a test drive? Start your 14-day trial now for only $7.

The Bottom Line

I’m not your therapist. I’m not a guidance counselor. I’m here to teach you what I’ve learned over the past 20 years. Sorry to be rude about this, but I want to be transparent. I don’t do well with snowflakes.

I know that’s offensive to some people but I’m trying to teach my students to protect themselves. The stock market is a battlefield. Penny stocks are a battlefield. If I don’t prepare you for war, you’ll get freaking annihilated like too many traders.

Are you a trader? Comment below by writing: “I will use the right tools.” What else will you do to prepare today?


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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”