Description

My basic trading philosophy can be summed up by one simple quote:

"Trade the ticker, not the company" - Nate Michaud


Friday, January 31, 2014

My Early Days of Trading and Challenges I Faced

I get a lot of questions from people asking me about their specific challenges and how to best deal with them when it comes to trading. While I try my best to give good advice, at the end of the day I can really only reflect my own experiences. I believe my story is much more useful to someone in their early twenties, just getting started, than someone who might already have a family or a full-time job. What I'm going to do is give a detailed breakdown of my story and the path I took, from the time I first became a Pennystocking Silver subscriber up until the time I was making enough money to support myself. Hopefully, everyone can find a certain element of this story to relate to and find some guidance.

In February 2011, I found Tim Sykes. At the time I was a Senior at Marquette University, on track to graduate in December 2011. I had a couple thousand dollars to my name, but my parents were paying my rent and tuition (yes, I was fortunate/spoiled). I immediately recognized that any of the brokers I wanted to fund required at least a $3000 deposit, so I knew I was going to have to ask my parents to give even a little more. I remember late in February discussing Sykes and his strategy with them and asking for money to get my ThinkorSwim account open. The answer I received was not ideal. They wanted me to paper trade for a couple months but also take some time to learn the strategy better. I spent February through the end of April paper trading and studying the Pennystocking Silver video lessons. I also discovered Nate's (at the time free) nightly scans and Michael Goode's superb blog www.goodetrades.com. Yes, I was putting in my time studying, probably spending a couple of hours a day on it, but I also paper traded here and there. I had something like 8 winning "trades" in a row and felt like I was on top of the world!

Finally, at the start of May, it was time to begin trading. My parents initially loaned me $1500, and I took $1500 of my own money to use as well. With this $3000, I opened up my ThinkorSwim account. Let me note this now - I had an agreement with my parents that their money would NOT be used for trading activity. It was simply there to keep the account open and help me with margin requirements. My early plan was simple - I would mostly follow Tim's "long" alerts trade for trade, while occasionally venturing off on my own to try my own trades. I figured that it would just be like paper trading. I was wrong. I immediately noticed how SCARED I was anytime I entered a trade. I was taking $1500 positions (or whatever my full personal bankroll was), so it's no wonder. It was "all in" every time. Emotions clouded my judgment, the physical act of having to enter trades slowed me down, and I was not coming nearly as close to matching Tim's entries and exits as I had on paper. I had a very slow start, and by mid-month and the end of my college semester, I was down $150. 

At the end of my semester, my summer job at State Farm began. I was working 40 hours a week and trying to trade from web browsers since I couldn't download any software. I continued mainly trading Tim's alerts, and along the way discovered new challenges that I had not anticipated. I quickly learned that holding an overnight position meant losing that buying power the following day, even after you had closed the trade. I learned that ThinkorSwim rarely had shares to borrow. I learned that ThinkorSwim was not the best broker to be with for OTC executions. I also discovered the frustration of the pattern daytrader rule, as my small $3000 account was restricted to 3 daytrades every 5 business days. It was clear I needed to make some changes.

I once again turned to my parents for help. They loaned me an additional $12,000, which I used to open up accounts at Interactive Brokers and Speedtrader. I split the money up so that I had $3000 at Speedtrader, $3000 at ThinkorSwim, and $9000 at Interactive Brokers. This allowed me 9 daytrades a week, more shares to short at Interactive Brokers, and better OTC executions at Speedtrader. The same agreement applied with my parents, I was to take no more than $1500 positions (or whatever my portion of the account was). However, I did have more daytrades and far more flexibility than I had before. This flexibility - and refining my rules a bit - turned out to be helpful, and I found myself up roughly $300 at the end of July.

In August, suddenly the wheels came off. I learned another series of lessons, and this round of lessons was far more painful. One promoter I had been particularly interested in early on was "Awesome Penny Stocks." I had tracked on my own the % of the time they gapped up after a green day and what the average % gap up usually was. It seemed to be a setup with exceptional odds. This is when I learned the lesson, "Not all promoters are the same." I tried to apply this rule to a different promoter and wound up getting smoked on a morning panic the following day for a $300 loss, my largest ever. I also took large losses trying a strategy called "Boxing" with a promotion, which cost me approximately $800 over a couple of weeks while toying with the position. For whatever reason, to this day I still can't really handle "boxing." Some strategies just don't work for certain people. I suffered a few other emotional losses, and by the time I was headed back to Marquette I was suddenly down $1300.

I had already set up my Fall class schedule at Marquette to accommodate trading, scheduling as many night classes as possible. I was faced with a tough decision. I could cut my losses and move on with my life, or I could take one more chance. I felt like I knew where I had made my mistakes, and I knew I had learned from them. I made about $4500 from my summer work at State Farm, so I decided to plunge an additional $1500 of my own money and give trading one more try.

This entire four months I had carefully tracked all of my trades, and it was clear that I performed best in two situations - buying new stock promotions and buying stock promotion breakouts. At the time, both of these strategies were much more consistent than they are now. I focused in on these two setups and ignored all else. Every now and then I had to miss trading for a class (only if it didn't allow laptops), but most of the time I was able to stay in front of the market. I also spent quite a bit of my time in the Pennystocking Silver chatroom, likely driving chat moderator Michael Goode crazy with all the questions I was asking. Slowly, I dug my way out of the hole. Many days I would not even make a trade. I was just waiting for the setups that I was comfortable with. By November 2011 I was back to break even.

I had seen what sticking to my "best" setups had accomplished and how much more consistently I now traded. By clawing back to break even, I now had $3000 of my own money in my accounts. I decided that I was confident enough to jump up to $3000 positions. In mid-November, it paid off. I finally hit my first major trade, making over $2000 on new Awesome Penny Stocks promotion AMWI. My immediate instinct wasn't to keep aggressively growing my account; rather, it was to hug these gains. I continued trading $3000 position sizes, getting away from my "all in" mentality. Trading slowly became less scary, as my overall account risk became lower. By the end of 2011, I was up about $4000, and I knew that I wanted to trade full time.

My Marquette graduation came and went, and I convinced my parents to let me live at home and trade full time rather than use my market experience to go out and find a job as originally planned. Living at home came with a stipulation though - I had to make $10,000 from trading in the first quarter of the year. If I wasn't able to accomplish this, I would either have to get a job or find my own place to live and trade.

Trading the first couple of months wasn't super eventful. I slowly grew my account, mostly through the same two setups I found success with up to that point. I had shuffled around my brokers a bit, as I had closed my ThinkorSwim account and moved money over to Broad Street Trading, a prop firm that would allow me to trade with no Pattern Daytrader Rule. Broad Street didn't allow me to trade a lot of the OTC tickers I wanted to though, so my time there was short. I moved over to Suretrader very briefly, just to have a broker that wasn't affected by the PDT rule. I only opened a $3000 account there. I can't say I made significant money there during my first stint with them. In February 2012, I finally hit the big moment I had waited for, I grew my accounts up to $25,000 total (including my parents' loan money). I quickly withdrew money from most of my accounts and merged it all into my Speedtrader account. I chose Speedtrader because up to that point, I had the most success from quickly buying new pumps and Speedtrader best fit that strategy. I now could trade freely at Speedtrader, and I began to get a bit more adventurous with the setups I would trade. It was at this point that my profits began to accelerate, and every couple of weeks I would pull a little money from Speedtrader and move it to my Interactive Brokers account so I could short sell again. 

By mid-March 2012, I had accomplished my goal of $10,000 for the first quarter. I continued to live at home, because the low costs allowed me to keep more money in my accounts and less money flowing out to pay bills. The highlight of the next couple of months was nailing a couple massive trades on new promotion releases, further propelling my accounts. One frustration that I experienced during these months was tax estimates. Every few months I would pay my estimated taxes and draw my accounts right back down. My accounts also occasionally suffered as I slowly paid my parents back the money they loaned me. Despite all this, by August 2012 I was up roughly $100,000 on the year; so I moved to Columbus since I knew I was finally ready to be self-sufficient.

It was a long and complicated journey for me, and as you can see, I received quite a bit of support along the way. Do I think I could have still succeeded without those initial loans from my parents? Yes, I believe I could have. However, I will readily admit that I think the process would have taken me much longer. This is the path I wound up taking, and you all will have your own unique paths to travel as well as you build your stories. I hope that my experiences can be of some use to you!

54 comments:

  1. Tim, Congratulations. Well deserved and I wish you continued success.

    - Salem

    ReplyDelete
  2. Nice story. I am a full time trader for 7yrs+. I have watched you from afar as I have kept tabs on Sykes since his early days.

    Great inspiration for others. For myself, it was a nice reminder to stay focused on what you are best at.

    Thanks for sharing your story.

    By the way, congratulations on your first millie$.

    JR

    ReplyDelete
  3. Thanks guys! I really appreciate the kind words!

    ReplyDelete
  4. Thanks for sharing. I appreciate your journey. Hope mine will be successful also. I will use information you shared to help me begin. Just saving money and doing lots of studying at this point. Thanks again.

    ReplyDelete
  5. Thanks for sharing Tim seeing as I'm somewhat in the same situation it gives me hope that there's light at the end of the tunnel.

    ReplyDelete
  6. With pretty much every success story I've read so far, it seems the key first step is always "I borrowed a lot of money from my family to get started." Does that mean there's little hope for those of us who don't have rich parents to open accounts for us? You even admit that this was a key factor. I'm curious as to what you think the extended time frame would have been had you not had that going for you. Years, or even decades?

    While your story is certainly fun to read, I'd like to hear from someone who didn't have that starting advantage, just to see how much longer "it would take a lot longer" is. It's frustrating when all you can afford is a $500 Suretrader account and you're told that even these entry-level accounts can make real money, but then when it comes to trying to find a relatable "how I started" story, it seems that most successful traders start with someone just handing them a big pile of cash. Is there any successful trader who did not start that way? That is a story I would like to read, as it would be more applicable to my (and I think a lot of people's) real situations.

    In any case, I'm glad you were able to turn your accounts into success, because regardless of where you started it's still a good story and I do appreciate you sharing. I'd just also like to hear from someone who didn't have a magic parental money fountain to dip into, as that's never going to be an option for some (most?) people.

    ReplyDelete
    Replies
    1. Hey Summer,

      Like I said in the post, I won't deny that the money helped. But would success have been possible for me without it? Absolutely. I still would have traded the same setups, I still would have learned consistency, the area that the money helped with the most was that I got to the pattern daytrader limit quicker. I agree, it would be interesting to hear from someone who didn't have the advantage to see how much it slowed their process down. But at the end of the day it's all about making good trades and sticking to reliable setups. If you can stay disciplined and do that, the rest should eventually take care of itself, regardless of account size. It just will be a bit slower of a process

      Delete
    2. I dont have rich parents. I worked at Castle Burger flipping burgers and cleaning the shop 2am in the morning. But still saved money simply by living in one room with 2 immigrants, keeping costs low (while me friends were splashing money at colleges, buying cars or handbags they couldnt afford) and so I was saving money ($3Grand) until I could open a brokerage account with SureTrader. You dont have to have rich parents... just a goal, vision and discipline.

      Delete
    3. I wish you wouldn't take out your frustrations with your own life on other people, especially the ones who provide a service for free. You came to his site to read his story but then wish you could read a story about someone more in your situation? What?

      $1500 and $12,000 aren't "big piles of cash" and he didn't even use them for trading. I saved far more than that working and being frugal for five years.

      If anything, more than "rich" parents, his greatest advantage was starting young and single. I can't imagine trying to get into day trading with a full time job and a family.

      Delete
    4. Dear Unknown,

      Some very poignant insights you have brought up my friend. Thank you and thank Tim for sharing both of your stories.

      Delete
  7. Great inspirational post Tim. Thanks for all your help in my journey. Looking forward to more blog posts!

    -Fred

    ReplyDelete
  8. Really meaningful writing Tim, thank you so much for sharing your experiences!

    -John

    ReplyDelete
  9. Tim thank you very much for sharing. I have been waiting for some time now to see you publish something along the lines of this. I was a Penny Stocking Silver subscriber for a few months as well. I first learned about Tim's strategy a little over a year ago and immediately fell in love with it and decided to rush into things and put in all the money I had saved up over the last year into it. (Roughly 8k) I thought I had researched enough and found out quickly I should have taken 5k of it and became one of his students instead of trying it on my own.
    I learned the hard way about buying a pump then have the SEC suspend it the following day costing me 2k after it reopened two weeks later. Then I learned about the borrowing fee from o/n positions from Suretrader and how much commissions can really cost when you traded as much as I was trading. After some time I decided that strategy wasn't for me and am currently following Superman and hopefully over the next few years I will be a success story such as you. I am currently 24 and live with my parents and I am a server for the time being trying to save as much as possible just to put strictly into trading right now. I am from Illinois just like you are and I seriously admire your determination and dedication and would feel as though I have the same drive as you but have to practice more on the patience. Again Tim thanks for taking the time to write this for us!

    -Nick

    ReplyDelete
  10. Thanks for sharing. The more knowledge we have the better decisions we make.
    Laura and Patrick

    ReplyDelete
  11. Agree with everything above.I noticed that from the track record the last trade is from Jan 31st.Can you keep that updated ?
    rergards and congrat for that first $1M

    ReplyDelete
    Replies
    1. Yup, the track record will automatically update as I import trades to profitly. I do this every weekend!

      Delete
  12. Thanks for sharing! These articles can help us, new traders, a lot. Great article. Keep them coming! Thank you!

    ReplyDelete
  13. Hi Tim - yours is a great story, congrats on your success. I have a question regarding your current approach. In your post, you mention:

    "it was clear that I performed best in two situations. Buying new stock promotions, and buying stock promotion breakouts. At the time, both of these strategies were much more consistent than they are now. I focused in on these two setups, and ignored all else."

    With new stock promotions & breakouts being more inconsistent now, what would you say are the setups that you are currently focused on?

    Thanks in advance,
    -Eric

    ReplyDelete
    Replies
    1. I definitely find myself short selling a lot more than I used to, in fact I even have slipped so far in that direction that it's hard for me to bring myself to buy a lot of these promotions now like I would have in the past. The marijuana hype lately has been great though because those aren't pure pump and dumps, but trade almost exactly the same so I'm forcing myself to buy breakouts on these and get back to the buying ways!

      Delete
    2. This comment has been removed by the author.

      Delete
  14. Thanks for a vary helpful live-lessons with lots of powerful info

    ReplyDelete
  15. Hi Tim and thanks for this helpful blog!
    It looks like you became a PennystockingSilver subscriber towards the start of 2011 when you started with Tim's video lessons. So when did you first become a Trading Challenge student? Which would you recommend for someone just starting out with no experience?

    ReplyDelete
    Replies
    1. Nevermind Tim! Found your answer under FAQs.
      Thanks for this blog---it is super helpful to us!

      Delete
  16. Hey Tim thanks for sharing your inspirational story, I learned a lot.

    ReplyDelete
  17. Thank you Tim for sharing the information... very inspirational...I feel more confident about my own success after reading your story!

    ReplyDelete
  18. Hi Tim, I got a couple of questions:

    1. Do you purely look at the price action and spot breakouts or do you also read a lot of news like Tim Sykes tend to do?
    2. Do you think its possible to have the same succes as you, without digging deep through every news article like Tim Sykes does?

    Thanks! And congratulations on your succes!

    ReplyDelete
  19. This comment has been removed by the author.

    ReplyDelete
    Replies
    1. I would like to understand this as well, Tim. Thanks! (first comment/sub comment)

      Delete
  20. Hello Tim,

    I have spent the last few days reading all your post. This is one of the most helpful site I have come across as a beginner. No in your face marketing, just information.

    I plan on taking the same approach you took to trading, and hopefully succeed.
    As a total beginner, do you recommend having one account with a broker to avoid the PDT or have 3 account with 3 broker and take things slow, since each of them seem to offer different advantages?

    If its only one account would you recommend speedtrader or interactive for a beginner?

    Thanks

    ReplyDelete
  21. When did u become a TIM Challenge student?

    ReplyDelete
  22. Great write up on how you got started, very inspirational. similar to what Im doing now is only trading one pattern that works for me with 3k to 4k as opposed to 10-18k I used to, and having the need to trade all the time and blew my account up. now slowed down and getting consistent small gains past couple weeks and almost back to break even.

    ReplyDelete
  23. Thank you for the inspiration to want to start trading the right way. I have never invested a penny of my own money in the market, I will once I learn and read all that is required.
    That journey begins with reading all your blog posts.

    ReplyDelete
  24. This comment has been removed by a blog administrator.

    ReplyDelete
  25. Hey Tim, I really find your blog very helpful and I could definitely relate to a lot of things you went through. I am currently going through some of those myself. Thanks for making an effort and blogging, I know it takes a great deal of time, and I really appreciate it.

    ReplyDelete
  26. Hey Tim, inspiring me to be a full time daytrader. Im from Venezuela and have a lot of trouble opening and funding accounts. I finally open an Interactive Brokers account and will be able to short more OTC stock. hope to be soon a succes like you.
    Thanks for your blog and your advice.
    Congrats!

    ReplyDelete
  27. Hi Tim. I'm Miguel! I'm new to your blog and I have been doing nothing but learning Tim & Tim's strategies (My name for you and Sykes). You wrote about how you could have accomplished the same results in just a longer time span if it wasn't for your parents help but do you think you can accomplish what you have done in trading if you were just starting now in 2015? What has changed since you started in 2011 can pose challenges for us who are just starting out?

    ReplyDelete
  28. Thank you Tim! I just came across your website today at like 4PM now its 12:11AM and I am still on your website reading... Your story gives me hope and motivates me to succeed.

    ReplyDelete
  29. Hi tim..Thx for this Blog..really Usefull !! In my country Indonesia trading still not popular, so i can only study over an internet..i want to ask u what virtual trading or papper trade web that you use/recomended? Appreciate it..

    ReplyDelete
  30. Hey tim i have two questions that you can hopefully answer. when you hit your huge stride and confidence in early 2012 to august 2012 (when you made you first 100k total) were you still studying all the time? my other question is about size. I notice that sometimes you make 20k profits, my question about this is, you obviously must be taking positions of 20k shares or above to make that. How are you able to fill that much size during a day trade? do you have to pay close attention for the float and volume? and do you scale in like 5k at a time or something? just done see how its possible to move in and out of a stock with that many shares. I literally found it difficult to fill 500 shares sometimes lol.

    ReplyDelete
  31. Question-- when shorting a stock and it reverses, meaning it goes up do i have to pay back the broker right away, end of day or can i hold it until it comes back or goes down how does that shorting all work money wise please

    ReplyDelete
  32. Question-- when shorting a stock and it reverses, meaning it goes up do i have to pay back the broker right away, end of day or can i hold it until it comes back or goes down how does that shorting all work money wise please

    ReplyDelete
  33. Thank you, a great read. I will read and study everything you have.

    ReplyDelete
  34. So tim let me get this right, you gaining all this success by becoming
    pennystocksilver subscriber and never a TMchallenge student. I am wrong at what point did you join the TMchallenge student and how did that change trading vs only being pennystocksilver subscriber. thanks in advance

    ReplyDelete
  35. So tim let me get this right, you gaining all this success by becoming
    pennystocksilver subscriber and never a TMchallenge student. I am wrong at what point did you join the TMchallenge student and how did that change trading vs only being pennystocksilver subscriber. thanks in advance

    ReplyDelete
    Replies
    1. This post should answer your question! http://tradetheticker.blogspot.com/2014/01/question-what-do-you-think-of-tim-sykes.html

      Delete
  36. I already read this post and it never mentions that you become a TMchallenge subscriber ; however, it explains that had you gone this route, it would have shorten your learning curve.

    ReplyDelete
    Replies
    1. Oh okay sorry for confusion, I joined the challenge after I'd been a silver sub for 1.5 years, and was up $100k

      Delete
  37. Awesome story man! Have been following you for a few months now and only today found out about your blog trough a podcast I listended to :D

    Wanted to ask you, as someone who wants to trade from europe, does the PDT rule apply to me to and are there ways except the multiple account tactics to avoid it? (Like some brokers who don't apply it(didn't really get that part))

    And also wanted to ask what the best resources for learning are. Have watched lots of tim sykes's stuff and listendet to his and your podcasts, and also now reading trough your and michael goods blog like crazy. Are there any pointer in learning you could give me? Cause I still feel like I don't know enough to begin.

    Thank you,
    Mike

    ReplyDelete
  38. Awesome story man! Have been following you for a few months now and only today found out about your blog trough a podcast I listended to :D

    Wanted to ask you, as someone who wants to trade from europe, does the PDT rule apply to me to and are there ways except the multiple account tactics to avoid it? (Like some brokers who don't apply it(didn't really get that part))

    And also wanted to ask what the best resources for learning are. Have watched lots of tim sykes's stuff and listendet to his and your podcasts, and also now reading trough your and michael goods blog like crazy. Are there any pointer in learning you could give me? Cause I still feel like I don't know enough to begin.

    Thank you,
    Mike

    ReplyDelete
  39. Hey Tim I've been following and reading up on a lot of things that you've posted recently. I have also started my own calendar and started to track all my wins and losses. I started with only $500 and now I'm at $1300 in a matter of a week. However I want to ask my parents for a loan and it is very hard. How did you do it? Thanks!

    ReplyDelete
  40. Awesome Mr. Tim
    Your story is very inspiring for those who wanna start trading Penny Stocks.
    I also wanna start with small investment. I am really grateful to you for sharing your story.
    Do you have any youtube channel?

    Best Regards.

    ReplyDelete