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Aug 18

The truth about Tim Sykes from a former critic

Is Timothy Sykes a fraud? The former trading wunderkind and small-time hedge fund manager now sells stock-trading DVDs and trading advice. Should you listen to him? Should you ignore him? Read on for the answer.

When I first came across Tim Sykes over a year ago I was skeptical. One year later, after $77,775.01 in profits using his trading strategies, I have turned from Sykes’ greatest critic to his most ardent fan. This is the story of how he changed my mind.

I first came across Sykes in March of 2008 and I wrote this critical post:

Timothy Sykes, the boy wonder who turned $12,000 into $1.65 million while still a teenager, has abandoned his hedge fund Cilantro to re-create his day-trading achievement in full view of the internet on his new blog. Sykes is best described as young, brash, egotistical, and annoying. Of course, an impartial observer would describe me in much the same way. Timmay and I also share the preference for shorting stocks over buying them. But rather than being two peas in a pod, we are polar opposites: Tim is the quintessential short-term trader and I am the archetypal buy-and-hold value investor.

I am not like some people who say that day trading is a crock and that it never works. It can work for some people some of the time. The problem with Tim Sykes is that he encourages others to follow in his footsteps by buying his happened to Richard Dennis, the noted commodities trader, who famously lost tens of millions of dollars in 1988 after his trend-following strategy stopped working. Sykes of course likes trading microcap stocks with relatively thin markets. This means that his system is especially prone to break when too many people start using it.

  • Trading takes a lot of time; this is particularly true for Timmay’s day trading and momentum trading. Most people have jobs, and very few people have enough in savings and enough trading talent to make a lot of money trading. So for most people, time learning to trade would be better spent nurturing their career or working a second job.
  • Trading any system takes incredible self-restraint and guts. Very few people have the self-control to be able to stick to a system even when it is not making money. This is even harder if a trader buys a system (say, from Tim Sykes), because it is harder to become truly convinced in the system if that trader did not invent it himself or herself.
  • Traders and investors should steer clear of Sykes’ DVD and his trading system. Those few who could be good traders would likely do better developing their own system rather than following Tim’s. Of course, I find Tim amusing, so I encourage you to read his blog for its amusement value.

    Sykes and I had a rather entertaining back and forth in the comments on that blog post. After that exchange, I decided to do some deep research. I went back over every single one of his blog posts. I looked up the stock charts on every stock he mentioned to see whether his predictions about stocks were accurate. I looked at every single one of his previous trades (all verified by Covestor, on which he is the #1 ranked trader; please note that Covestor does not account for cash in a trader’s account when it measures performance; so while according to Covestor Sykes is up 48,000% since November 2007, and he would be up this much if he invested 100% of his account in each trade, his account is up only 475%). I realized that Sykes’ trading system worked. He was right far more often than he was wrong. His trades were consistently profitable. I bought his Pennystocking DVD and his book and I subscribed to his TimAlerts trading alert service.

    I started trading using both by following his trading alerts and by trading on my own using what I learned from the DVD and book. Slowly, almost inexorably, the profits piled up. And it wasn’t just by piggybacking on his trades that I made money; when I traded stocks he did not trade I made even more money. As I write this, my total profit from TimAlerts is $28,093.77 while my total profit from doing similar trades on my own is $49,667.25.

    In September of 2008 I wrote  Why I paid Tim Sykes $2000:

    I previously wrote about Timothy Sykes and his attempts to teach stock trading to the masses. That post is now my most commented-upon post on this blog and one of the most frequently viewed. Since writing that post I have changed my views on Timothy Sykes.

    First, I have concluded that at least at the present time Sykes’ trading system works quite well. This does not mean that it will necessarily continue to work, and anyone using his system should not put blind faith in it. That being said, the basic premise of short-selling hyped-up stocks should continue to be successful far in the future, although the details of how best to do that will certainly change. I believe in Sykes’ system enough to trade a decent amount of money with it, and so far I have made quite a bit of money trading his system. You can see some of my successful trades on Covestor (note: I no longer use any brokerage accounts that Covestor can auto-follow, so my trades are no longer there).

    I have become so convinced of the benefits of Sykes system that I bought his DVD, subscribed to a year of his TimAlerts service (whereby he sends his followers alerts every time he makes a trade, and I even recently bought the first Lifetime TimAlerts subscription (for which I paid him $2,000). I even signed up to be an affiliate to sell his products.

    Normally a trading system will either produce a good probability of a profit (i.e., a high percentage of trades will be profitable) or a good ratio of average profit to average loss. Sykes’ system generates both a high percentage of profitable trades and profitable trades that make far more money than unprofitable trades lose. In this sense it is the Holy Grail of trading. The system’s major limitation is that it generates very few trading opportunities where more than a few thousand dollars can be easily deployed, although there are occasional trading opportunities where hundreds of thousands of dollars can be easily used. Also, there are relatively few trading opportunities. This limits the amount of money that can be made with this system to maybe a couple hundred thousand dollars a year at best. However, this limitation of the system also minimizes the chances that hedge funds will exploit the same inefficiencies that the trading system exploits and thus render the system ineffective.

    The other problem with a trading system that produces few trading signals is that it is hard to keep from over-trading. The hardest thing to do is sit and wait, as evidenced by Sykes’ own history of impulsive, forced trades. While he was still able to reap huge profits, others may be less disciplined. I have already seen evidence of followers of Sykes’ TimAlerts service trading way too much (and Sykes himself has criticized his followers for this numerous times). I think it likely that some of them will trade away all their profits by forcing trades when the risk/reward ratio is poor.

    My Original Criticisms Still Stand

    In my original article on Timothy Sykes, I laid out three criticisms of his plan to teach trading to the masses. These criticisms still stand, although these criticisms point out the limits of an otherwise powerful system, rather than revealing the ineffectiveness of the system as I argued in my original article. Anyone considering following Sykes should consider the following:

    1. While Sykes’ system will degrade gracefully (meaning that if it stops working it will gradually generate smaller profits, not change quickly from generating profits to generating large losses), I have already noticed cases where he and his followers’ actions have changed the chart patterns his analysis relies upon. He has enough TimAlerts subscribers that they can easily move the market in certain illiquid stocks. This makes using his system more dangerous than if he did not have so many followers.

    2. Trading takes time. For many of Tim’s followers, with tiny $5,000 accounts, the amount of time they spend trading the system (especially if they do not follow his advice and ignore non-ideal trades) can be disproportionate to their gains. While I am a full-time trader (I utilize a few strategies, not just Sykes’ strategy), many of his followers have other, full-time jobs. Those people would be wise to concentrate only on the most ideal trades, lest they ruin their careers in a vain attempt to get rich trading.

    3. Most people do not have the emotional restraint to be successful traders, no matter how simple and effective the trading system they use. This is my most important criticism. As even Timothy Sykes points out, over 95% of stock traders lose money. Those who cannot handle the emotional demands of trading will likely lose money even if they try to trade a system as simple and profitable as Timothy Sykes’ trading system.

    Conclusion

    If you want to try trading stocks, try following Tim Sykes’ system (I suggest just reading his website and analyzing his trades for a few months, although you can go ahead and directly buy his DVD or TimAlerts trade alerts service if you are rash); it is the best stock-trading system I have seen, as evidenced by Sykes’ top rating on Covestor and his multi-year performance record. However, most stock traders will lose money because they let their emotions rule them; using a profitable system will not prevent them from losing money. Recognize your limits and do not try to trade if you do not have the requisite emotional control.

    Conclusions about Tim Sykes

    Tim Sykes’ trading system works. He is selling the real thing, not a scam (unlike most other trading gurus). Trading based on his TimAlerts service has given me more than ample profits. Trading based on what I learned from his DVDs (I recommend Pennystocking 2, it is by far his best DVD) has been even more profitable. He is one of the few stock traders selling their trading systems who has an impressive and verifiable record. Furthermore, he is honest about the limitations of his trading system: it is not scalable. It would be hard to put more than $100,000 into many of Sykes’ trades and the best percentage returns often come in illiquid stocks where a $10,000 position would be the prudent maximum. But this Achilles’ heel of Sykes’ trading system is also a key feature, because it ensures that hedge funds and other sophisticated investors will not come to dominate this niche.

    sykesprofit_med

    Disclosure: No Positions. I am an affilliate of Tim Sykes as well as a customer (although I did not become an affiliate of Sykes until after I had gained over $20,000 in trading profits using his system), having purchased multiple of his DVDs (I recommend Pennystocking Part Deux; it is by far the best) and being a Lifetime TimAlerts member. I own Pennystocking, Pennystocking 2, and TimRaw. I have a disclosure policy.


    Profit from Penny Stocks. Learn from a millionaire who shares everything! Learn from Timothy Sykes.

    14 comments

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    1. Preston

      Great article here, I will follow the links tonight when I have more time. I did trace back a little ways and read the exchanges between you and Tim and saw the turning point of the conversation.
      I’m sold and will surely purchase the DVD, you have sold me on that. It’s kool to see some of the haters that are surely jealous of Tim and his followers, there will always be that in anything you do. You can’t please evrybody and there is no sense in even trying, the people that wan’t a get rich quick scheme or the easy way out never understand that making money in any trade takes work and dedication. That said some people will never be good traders, just like I will never be good at football due to my size, and maybe my gambling type mentality will hold me back in trading as well. Already today I did good on AXL going up but thought I could short it back down and gave up all my gains, I’m going to have to stop over trading, stick with the rules and be patient. The more I read the more I understand what has to be done, question is can I apply it to be profitable.

      1. Robin

        Hey mate, just read your comments. Wanted to know if you ended up buying DVD or did any share trading? how did you go?
        Cheers
        Robin

    2. Tastylunch

      Man that seems so long ago. I remember your hater days, I was a hater as well.

      But that I guess is why it pays to be open indeed and willing to question independently verify ideas. Being intellectually honest is crucial to surviving in the trading world.

      It does seem the guys who get the richest are the guys who do something everyone says can’t be done.

    3. Mark

      I didn’t believe him at first either. It took months of watching his success starting with the 12 or 14K before I realized how great day trading and trading these kind of set-ups can be.

    4. augusto

      Great article, most traders talk about Skyes without knowledge about what he does. Here we have some one how used the strategy and found some gains with it. I think i´ll do the same, i´ll buy the dvd, the book and suscribe to tim´s alerts. There has to be some thing to learn.

      1. Chris

        Augusto:

        How has your trading been going with the purchase of the DVD and alerts?

        1. Josh

          He’ s now a millionaire .. No response

    5. Trade10

      Hi
      Great artical!!!!
      Where can I get to buy the dvds alone?

      1. Michael Goode

        Much of your blog post criticizes straw men. Tim has said from the beginning that the reason he teaches is because his strategy doesn’t scale well. Tim doesn’t say that it is likely or common to take a tiny account and make $1 million (or $100,000) with it. Also, you say or imply that the big traders make money by adding as short squeezes go against them. This isn’t what Tim does or what I do — he advises getting out quickly. And if a stock has a mega short-squeeze then those that cut losses quickly have a better opportunity to profit when that squeeze ends.

    6. [email protected]

      Congrats on your astonishing success Michael, …. if it is really true. Weather Tim promotes or not promotes reaches with small accounts is up to the jury to decide based upon the character of his massive media advertising. I simply and extremely kindly asked Tim to provide a true broker’s account statements showing that somebody made, in the last few years, a lot of money trading $5,000 acct without refiling and without any blow ups; Can you provide yours please? …The true acct, I mean, NOT Profit.ly. It doesn’t have to be $1,000,000 profits or even $100,000 in profits. Yet Tim had not provided any true broker’s account statements to support his “dream selling” advertising campaigns and he is charging/selling to massive number of deceived people who actually believe him. Instead he kept publicly insulting me without prior checking my genuine and FREE contribution to the trading community, click here:
      :http://angeldanjournal.blogspot.com/

      Is profit.ly fake ? click here: http://www.tradingschools.org/profitly-fake/

      It is his burden to prove the worthiness and the success of what he is preaching in such proportions he is representing it. The number of his true successful students versus the number of his unsuccessful student will truly determine weather he is a righteous man. It may take some time. Till then, he may keep withdrawing his cash from his bank accounts and hide it. Smart move while flashing photos of his cash to his fans, cash mostly made from the same fans paying for his subscriptions.

      Learn about Don Lapre here:
      https://en.wikipedia.org/wiki/Don_Lapre

      and watch him selling here

      https://www.youtube.com/watch?v=mubCkCAEiDQ

      Or you may go deeper checking more opinions here:
      https://www.youtube.com/watch?feature=youtu.be&t=10m28s&v=uZdf-TnE4M0&app=desktop

      1. Michael Goode

        Dan, you are not going to see any account statements for the simple reason that that is intrusive and unnecessary. And people like you who are convinced that Tim is a scammer aren’t going to change their mind just by seeing a few account statements.

        The Trading Schools review of Profit.ly is pathetic and wrong in many ways. I am not aware of any way to upload fake trades that will then show as verified trades. The guy who runs that website is an admitted fraudster and felon so no he cannot be trusted.

        Anyway, deciding to buy a service like Tim’s or any of the others out there based on testimonials is dumb (of course lots of people do this). The one thing that should matter is whether what he teaches works for him and can be done by others. And Tim’s time-stamped trade records on Profit.ly are much better for that than any account statements. I can verify that the timestamps are real on all his alerts.

        I’m going to stop allowing your comments. At this point you are mostly just spamming your blog, which is dumb anyway because WordPress puts NOFOLLOW on blog comment links.

        And here is 1.5 years of my broker statements. I will not upload statements from current accounts because they include personal information (such as my wife’s name) that I do not wish to disclose due to security concerns (death threats against me and death and rape threats against her and our daughter).

        http://www.goodetrades.com/wp-content/uploads/2015/12/IB-individual-all-2008.pdf
        http://www.goodetrades.com/wp-content/uploads/2015/12/IB_account_statement_all_2007_U395411_2007.pdf

    7. Shiro

      So I signed up for pennystocking silver with trade alerts, but I haven’t actually learned anything. Yes I understand how to study a company and see if it’s something that will hold or something that will just collapse like penny stocks normally do.. but I haven’t learned how to read the daily / moment-to-moment movement of stocks that you can use to profit from.. its all guess work. I have not yet purchased any of Tim’s DVDs so I don’t know if he talks more about actual trends that are predictable on a moment-to-moment basis, but most of the video’s I’ve seen from him are talking about overall chart patterns which don’t really help in real-time. Any tips on which video’s of his I can look at that help to learn about these kinds of trends?

      1. Michael Goode

        Have you watched many video lessons? At least with a lot of Tim’s more recent video lessons he is doing them while he trades, showing how he trades and analyzes the stocks he is trading. See http://profit.ly/content/category/live-trades

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