I must have been very bored indeed: I recently tried to read my way through some of the embarrassing hype on Tim Syke’s website concerning penny stocks.
Let me make myself clear: I believe you can make money trading penny stocks (or at least that would be my ignorant supposition) but I suspect that you need to do so in conjunction with pump and dump or other promotional schemes or (possibly, just possibly) by trading momentum on the back of announcements. Please note that I am NOT suggesting that Mr Sykes or his buddies organize such schemes or conduct business which is in any way illegal. One of his “pupils” talks of the advantages of being aware of promotional schemes being organised by third parties, and there is absolutely no criminal offence so far as I am aware in acting on tips which are publicly available from third parties.
It is not entirely clear to me at this stage whether aficionados of pump and dump schemes are able to buy in on the way up or short on or before the dump. Perhaps a mixture of both.
The big embarrassment with Mr Sykes is his awful self promotion. Endless promotional videos saying very little indeed but showing said Sykes surrounded by the trappings of his success in exotic villas and locations.
Presumably if you pay up for his expensive courses your receive something of more substance but I would not know and do not intend to find out. Some of his “pupils” are rather more forthcoming about their techniques but Mr Sykes seems to major on reading charts. Others in his coterie talk of the advantages of receiving pump and dump or other tipster information to see what is likely to move in the near future. Assuming such stocks have not already moved and the promoters (NOT Sykes and his buddies I hasten to add) are getting ready to enter the dump phase. If indeed that is what the promoters of such schemes intend to do.
The trouble with charts is that they are open to interpretation and having Mr Sykes talk of his favorite chart formations and triggers is of little use to those who like to act on more concrete information.
Mr Sykes is presumably aware that chart formations are mostly quantifiable and therefore algorithmically testable, but I imagine he is one of those many traders who believes that discretion and intuition trumps the algo.
I do intend to start looking at promotions – although I hasten to add I would never organize such an event myself. But as I have already stated, acting as a third party member of the public on stock action following somebody else’s promotion is not, so far as I am aware, illegal.
But surely an algorithm ought to be able to pick up on such price movements without actually receiving the endless tedious emails from the promoters?
With that in mind I looked at a few algorithms drafted for that purpose by various participants on Quantopian.
Here is a link to a back test on Quantopian where a staggering 18,000 % performance was achieved in 5 years. The trouble is minute data is used with OHLC for each minute. That means you have no idea whether your orders are being executed at the bid or offer. With spreads of 50% and upwards on penny stocks you are probably buying at the bid and reselling at the offer up 50% on a regular basis.
I believe I am right in saying those who tried trading this algo live found just that problem. These are however mere assumptions: without appropriate data the conclusions are meaningless. The only option is to buy the appropriate data or to investigate in live trading. It seems that volume spikes exponentially during these shenanigans and therefore one might be lead to assume that the spreads also narrow considerably for these periods.
So the quest remains: can these stock plays be attacked algorithmically?
Anyway these are just random musings put together while on lock down!