Timothy Sykes; A Stock Trader with a Large Stomach

One of the hottest topics of discussion in mainstream investing, and probably the least talked about subject behind the rotating doors of the investment banks, is whether its possible to earn above average returns using your own stock picks, rather then a diversified index fund. Extending on that question, would it possible to do so without having to face an increasing risk curve? In other words, can we use our own skill to make more money by applying different theories about stock price movements? The answer is, of course, yes, yes we can. A more in depth answer is, 99% of people can’t. Ideas are too complex, the human mind is to prone to focusing on results, and statistical deviation is to great (i.e, even a winning stock pick system can undergo long losing streaks). Many people have lost a fortune trying to conquer the market. Some have made a fortune. There’s no doubt winning systems are published on the internet. TraderX is one of these traders whom posts his trades for the day, and gives his thoughts on each. Scrolling through his archives, his system is available for all to see, but of course, only available to use by those who truly understand it.

The latest Market Wizard using promotion to gain stature in the investing community is Timothy Sykes, a 26 year old trader. Sykes recently released a book, ‘An American Hedge Fund‘, detailing how he turned his bahmitzvah gift of around $12,000 into $1.65 million. An impressive feat. His systems were simple, and utilised market conditions that existed during the dot com boom, and the subsequent bear market years. After opening a hedge fund and closing it this year, Sykes has decided to go back to his roots, attempting to turn that same $12,000 into 1.65 million, again, proving it was not a fluke. Each one his daily trades are updated on his blog, and verified by Covestor.

Is this guy for real, or is he a pretender? Looking at his strategy, he seems to use baseline breaks with momentum piling as his bread and butter. This is a strong pattern to trade, but also one of the most difficult. Whipsaws (false signals that a breakout in price is going to occur) are rampant in this strategy. But its also a strategy which allows large leverage, and most of his trades can be closed intraday, protecting himself from market disturbances. He seems like he knows what he’s doing, but its too early to tell. Rest assured, you can read about all his moves in real time. Who knows, may be in 20 years time this kid will be known as a ‘Warren Buffet’ style legend, and you’ll be able the equivalent of: “I watched Warren Buffet in real time!”.