Before I met my mentor, Tim Sykes, I was struggling as a trader.
I was trading large-cap stocks and wasn’t having any success…
And I wasn’t seeing the kinds of gains and account growth that I wanted to see.
So I went looking for another way to trade…
That’s when I found Sykes and soaked up everything I could about penny stocks.
And I started to have some success…
And eventually, I was making enough from trading that I could sell my business and trade full-time.
But I didn’t do it by just following Sykes’ trades or alerts.
I developed my own strategy…
And there’s a big difference in the way Sykes and I trade today.
So let me show you one strategy that Sykes loves and I hate. See which argument makes sense to you to determine if you should trade this strategy or not…
One Strategy Tim Sykes and I Disagree On
When I was learning how to trade from Tim Sykes, I was a short seller.
That’s the strategy he taught back in the mid-2000s when most people thought shorting penny stocks was illegal…
But once word got out that it was legal and it was a viable strategy, it became overcrowded.
With too many short sellers in penny stocks, we started seeing these epic short squeezes as shorts have to outbid each other to exit.
It becomes a buying frenzy that sends stocks skyrocketing.
So we had to adapt.
We had to learn how to go long and take advantage of those massive upside moves.
But we did it in very different ways…
To Dip Buy or Not To Dip Buy
Sykes likes to wait for parabolic stocks to have a massive pullback…
That way he’s not chasing a big spike.
He wants to join other dip buyers who missed the first spike and jump in thinking the stock can go back to its highs.
Sykes likes to ride the momentum those dip buyers create, and ideally sell into a bounce without expecting a home run trade.
On the other hand, I prefer to buy strength.
That’s why I like breakouts and high-of-day breaks…
I see those moves as confirmation that the stock can potentially go higher. And I want to join that momentum, ride it higher, then get out.
I don’t like to play guessing games. And that’s exactly what I think dip buying is…
I’m not a big fan of dip buying for the same reason I’m not a fan of idiot short sellers who short parabolic spikes…
I always say they’re trying to guess the top.
And dip buying to me, is like trying to guess the bottom…
A stock might hit a support level and you can enter ‘hoping’ it will hold … But then you’re forced to take a loss if that support level breaks.
I know there were traders in my morning webinar yesterday who were dip-buying TRxADE HEALTH, Inc. (NASDAQ: MEDS) around $16…
MEDS chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
And you can see that the stock went lower — over $2 per share lower — before it offered any kind of bounce.
That’s just not a risk I’m willing to take.
I’d rather avoid a stock trading below VWAP with weak price action…
And wait for the stock to prove itself by showing me it can break above key levels for more potential upside.
My plan for MEDS included a signal price of $20. It didn’t get hit, so I didn’t trade it.
And not trading is better than a losing trade.
Do you agree? Reply to this email and let me know if you like to dip buy or buy strength.
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Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
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