09.26.08
How to Get Rich Trading Penny Stocks
I first heard about Timothy Sykes at the beginning of this year. I was skeptical of his claims of making lots of money trading and even more skeptical about his ability to teach others to trade successfully. My article, “Timothy Sykes is Full of Bullship,” started a dialogue between Tim and myself. I started reading his blog and following his trades. I read every single blog post he had ever written. I became convinced that he was a talented and profitable trader and that his trading system worked. I then decided to subscribe to his TimAlerts trade service, where he sends out pre-market watchlists and alerts of his trades via email, to see if I could profitably follow his trades.
In the chart below you can see my profits from trading Tim’s system. Sometimes I followed his trades, sometimes I didn’t, and sometimes I traded stocks he did not even find. I started out trading small and increased the size of my trades over time (the red and fuchsia dots indicate where I increased my max position size).
(note: while the blue squares represent trades, many of them are me just adding to or gradually closing positions in what is essentially the same trade)
As you can see from the chart, I have done well. In just over 3 months I have made $40,000 trading his system. In one trade yesterday I made $19,000 in two days. But the amount of money I have made is not nearly as impressive as the lack of drawdowns that I have had. The one large (percentage-wise) drawdown I had (on 7/29) was my first trade after increasing my position size and it was an accidental trade that I did not even mean to make! Otherwise, my maximum drawdown was 15%, and even that was due to making a dumb mistake–getting too large of a position in an illiquid stock.
After my success trading Sykes’ system, I became the first lifetime subscriber to TimAlerts and wrote a blog post, “Why I Paid Timothy Sykes $2,000.” So, if you ever consider trading stocks (and not just buying and holding index funds as an investment, which everyone should do), then why not learn from Tim Sykes, one of the few people who makes money trading and has demonstrated an ability to teach others how to profitably trade. I recommend reading his blog, buying his book, and signing up for TimAlerts.
If you doubt my performance of Sykes’ performance, I suggest visiting Covestor, where all of Sykes’ trades and some of mine have been verified directly from our brokerage accounts.
Disclosure: I am a customer of Timothy Sykes and am the first TimAlerts for Life member. I am an affiliate of his and make a 25% commission on any sales he makes through the links on this article.
Lawrence Ross said,
September 26, 2008 at 12:49 pm
Good work Michael,
I enjoy watching you trade and look forward to making some profits too.
Lawrence
andrew said,
September 26, 2008 at 3:48 pm
Hi Michael, really enjoy your blog. How much money did you start trading Tim’s system with? From the chart, it looks like a small amt
Dividends Anonymous said,
September 26, 2008 at 4:10 pm
Insightful post Mike,
Although that type of strategy isn’t my forte, I certainly find approach informative. I’ll look back soon to see what else you come up with.
DA.
michael said,
September 26, 2008 at 4:41 pm
Andrew. This is a cumulative profit chart so it does not indicate how much I have traded with. My one large position was just this week for the short with $19k in profit. That was a $100k position. Two other trades involved $50k positions and all others were much, much smaller.
andrew said,
September 30, 2008 at 5:46 am
Hi Mike. How did you know that the price and volume spike on SIL from Sept. 23-24th was a good time to short the stock? I’m not saying it’s a good company, but it does have some assets and revenue. Could that not have been a possible takeover offer that someone got wind of? Isn’t it much safer to short a price spike on an OTCBB stock with no “real” business? Sorry if this is a silly question, as you can tell I’m new to stock trading!
michael said,
September 30, 2008 at 6:22 am
Andrew,
While Apex Silver was a real company, the stock was up 300% on no news, not even any serious rumors about a takeover. In trading there will always be risk that someone else knows more than you. But it is hard to find a less-risky trade than one where a stock triples on no news and then starts to fall.
shane said,
September 30, 2008 at 10:34 am
Michael, pretty brave to risk $50-100k on penny stocks, how on earth do u manage to get the shares to short, for that amount of money, assuming the stk price is $5, the share size will be 20,000, is this not correct ?
And, what amount did you start with in your trading acct?
Tks
michael said,
September 30, 2008 at 10:39 am
Brave? Not really. Trading is risky. I have a few different brokers. SIL for one was easy to borrow everywhere. I could have shorted 300,000 shares if I had the money and had wanted to short that many shares. Most stocks I trade I do have to fight to get shares.
As to how much money I have in my account, that is both hard to say and something I am not inclined to reveal. Substantially less than $1m but more than $100,000. I trade other strategies besides Sykes’ strategy.
shane said,
September 30, 2008 at 11:37 am
Tks Micahel… sorry didn’t mean to be intrusive on the value of your acct, just curious on what new traders should expect to start out with and what the expectation should be on the ROI
Cheers
michael said,
September 30, 2008 at 11:39 am
In therms of % returns, someone with a smaller account could do much better than I do. My account size is not very meaningful to the above statistics since I only took large positions on a few trades.
shane said,
October 2, 2008 at 12:32 pm
I put this question up on Tim’s site, may be you can answer it - Tks
“I have to say, shorting these small caps can be risky coz, these shares are borrowed from hedge funds companies and the like, I think there was already one large one that said they will not lend out shares so if more follow the squeeze will be on and the brokerage where your account is at will auto close your position. May be I am talking through my !@#, can someone pls tell me I am wrong.”
michael said,
October 2, 2008 at 12:40 pm
yeah, brokerages can force a “buy-in” to close a short position. There is no risk if just holding for a day or two. Even holding longer there is not a lot of risk, except for the most hard to borrow stocks.
Tastylunch said,
October 2, 2008 at 7:51 pm
Now that’s how to title a blog post to get readers! Nothing draws eyeballs like the phrases “Pron”, “bewbs” or “How to get rich”!
Haha from your talk last night, Timmay’s feature on you and this post, my guess is your popularity is going to well …. Pop.
I’ll be glad to say I knew you when (or at least knew of you since we’ve never actually met)
michael said,
October 2, 2008 at 8:50 pm
Ok, Tasty. Porn and boobs! Woohoo! My talk last night wasn’t that important … it was a class of 5 people at a second-tier university. Although I did replace a vice-president of Northern Trust as guest speaker.
Hey, and maybe I will move to Columbus so that we can finally be together! If you know of any big pharmaceutical or chemical companies in the area, let me know …
booby said,
October 14, 2008 at 10:32 pm
Michael, does Tim provide actual entry point, exit point and stop loss? Or does he just pick stocks, and it is up to you to set up your own system to use his picks?
michael said,
October 15, 2008 at 8:19 am
He provides morning watchlists and then alerts on the trades he makes. His system is fairly simple.
booby said,
October 15, 2008 at 8:25 am
Does that mean you just follow what he does? If he alerts only after he makes the trades, doesn’t mean you won’t get the same entry/exit?
michael said,
October 15, 2008 at 8:27 am
That is what many people do. I have learned his system well enough that I often enter before he does. Like I said, his system is simple, so after following him for a bit it is fairly easy to determine ideal entries and exits.
michael said,
October 15, 2008 at 8:27 am
Also, I trade a lot more stocks than he does, but using the same system. Tim is not setting out to just have people blindly follow him but to teach them how to trade.
booby said,
October 15, 2008 at 9:40 am
If all I do is follow what he does, does that mean I might get worse fills if I simply use market orders to enter or exit?
michael said,
October 15, 2008 at 10:00 am
First, never use market orders. Second, take a look at his past trades and his testimonials from his followers to determine for yourself how his followers do in terms of entry and exit points.
booby said,
October 15, 2008 at 10:15 am
You wrote ” I recommend reading his blog, buying his book, and signing up for TimAlerts.”
Would you also recommend his expensive DVD collection?
michael said,
October 15, 2008 at 10:17 am
His DVDs were too basic for me. You can get everything that you’d get from the DVD from studying his past blog posts. But it is a handy reference.
booby said,
October 15, 2008 at 10:26 am
How did you find his book? There are many reviews on amazon saying it is boring and did not really provide any real value.
http://www.amazon.com/review/product/0979549701/ref=dp_top_cm_cr_acr_txt?%5Fencoding=UTF8&showViewpoints=1
meh said,
October 24, 2008 at 9:41 pm
What was your initial capital when you began trading Tim’s system?
Buy Penny Stocks said,
November 4, 2008 at 4:31 pm
What do you think about the current state of markets? Is it a good opportunity to purchase some hedge funds? Does TimAlerts have any info on selling short? (ie hedge funds)
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