Timothy Sykes, a successful stock trader who has returned an impressive 630% in three years and has taught traders who became millionaires, has shared his top three patterns he plays daily. Sykes now teaches students to identify and trade the largest percentage gainers.
Sykes started trading during his senior year of high school when he bet on the stock market using his Bar Mitzvah money of approximately $12,000. He initially started buying random companies without much strategy, but he eventually discovered that most of the big gainers were small internet companies.
With little preparation, Sykes began trading at the right time, shortly after the 1998 market crash and a rally that lasted well into 2000. As a result, he got lucky and succeeded in his trades.
Today, Sykes’ income comes from his online program Millionaire Challenge, in which he teaches others how to become traders. Among some of his top students are Jack Kellogg, who made $8 million in two years, and Kyle Williams, a 26-year-old who made over $2.5 million in two years.
Sykes’ approach is based on a pattern he terms the Pennystocking Framework, which plays out when penny stocks or small caps rally by hundreds of percentages. To detect the start of this pattern, he puts together a watchlist of the biggest percentage gainers from the trading day, usually those that are up between 30% and 200%.
His favorite pattern is the morning panic, which happens if a stock suddenly has a 20% to 50% drop. Once a key support level has been reached, there’s usually a bounce back which Sykes likes to buy into.
While Sykes will trade any stock that fits his setup, his preferred sweet spot is stocks that are trading between $2 and $4 a share.
Unlike many traders who add to a winning position, Sykes prefers to scale out of a winning trade to mitigate risk. He estimates his win-to-lose ratio is around 70/30 but believes that half his losses came from cutting out too early.
People think there’s an exact formula or a list of hot stocks to trade, but neither is true, Sykes said. It’s about understanding the process, your trading style, and adapting to the constantly changing environment. Even amongst Sykes’ students, who are taught to spot the same pattern, there are different trading styles.
Sykes believes that most traders lose for various reasons, such as lack of preparation, trading without sticking to rules, overtrading, leverage, and large position sizing. He’s also not sure what percentage of his students become successful, but he compares his program to a gym membership, where the majority of people who sign up don’t succeed or follow through.
Trading is not an exact science, and even successful traders like Sykes face their own challenges, including an income pegged to the stock market. However, Sykes’ success and ability to teach others how to trade demonstrate that with the right approach and mindset, anyone can benefit from the stock market.
