Every once in a while, someone asks…
“Tim, if you had to start from zero, what would you do?”
It’s crazy now to think about how I got started, turning a few thousand into a few million dollars in high school and college.
I traded a lot of OTCs back then (and I continued to trade OTCs for years).
But today? I have nothing to do with OTC stocks anymore.
Don’t get me wrong…
I love OTCs and I hope they come back. But in the meantime, I’ve had to adapt.
So, the first thing you should know if you’re starting out today is: Adapt or perish.
You cannot stick with a strategy if it’s not working anymore.
OTCs stopped working because smaller companies have much stricter reporting rules now.
When that change came into effect, it prohibited companies from lying and pumping up their stocks like they used to.
So, many traders who used to focus on OTCs changed over to Nasdaq stocks.
That includes short sellers.
I personally don’t short sell penny stocks anymore because the squeezes have gotten crazier.
But those squeezes create HUGE opportunities for long-biased traders.
I’m not the biggest fan of trading short squeezes. But there is more upside and if you know the rules, there’s potentially more reward.
Today there are TONS of small- and micro-cap Nasdaq plays. Which brings me to…
3 Criteria for Finding the Best Setups
My strategy for new traders hinges on understanding that you have to follow the money.
In other words, where is money flowing in the market that can create the biggest moves?
Here’s what I look for:
1. Big Percent Gainers. This is nothing new. I’ve always looked for big percent gainers, whether I was trading OTCs or Nasdaq stocks (both long or short).
2. Liquidity. You have to be able to get in and out of a trade, which means there needs to be liquidity.
3. Volatility. I’m aware of news catalysts and chat rooms. But I almost don’t care what the news is (or who’s pumping it), as long as there’s volatility.
Another thing for new traders in this market is to take advantage of extended-hours opportunities
Most of my trades right now are either premarket or after hours.
It seems crazy to me because I never focused on premarket or after-hours trading until recently.
I spent almost two decades telling people to be very careful about trading extended hours.
Now I think it’s one of the best ways to grow a small account. See why I started trading during extended hours here.
Finally…
Start Small and Size Up Later
Your goal should be to work on the process and lock in singles.
When you lose, lose small.
In other words, trade scared. Trade small. Stay in the game.
If you do that, you can grow a small account over time and size up as you gain experience.
Many big traders make fun of me because after 25+ years I’ve only made roughly $8 million.
I’m fine with that, because I don’t try to trade big.
I trade to teach new traders how to grow a small account.
Remember, even pros and multi-millionaire traders lose. Sometimes, they lose big.
Focus on your education and focus on the process.
It’s the best strategy for new traders in today’s market.
If you have any questions, email me at SykesDaily@BanyanHill.com.
Cheers,
Tim Sykes
Editor, Tim Sykes Daily
