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A Great Trading Lesson From The Dude Who Turned $500 Into $2,000 In 3 Weeks

September 6, 2011 at 12:00 pm by Timothy Sykes

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A few weeks ago a PennyStocking Silver subscriber inspired a ton of poor folk with this tale of how he turned $500 into $2,000 in a few weeks using my strategy.

Now a few weeks later, his account is closer to $3,000, but he’s been busy watching all of these video lessons and he’s just experienced a great lesson himself that he wants to share:

FAST LOSS CUTTING

Many traders brag all over twitter and other parts of the web about how much money they are making which made me very stretchy of them especially, the traders who doesn’t talk about their losses openly or at least post trades on Profitly.

Yes, I was able to turn $500 into over $3000 in a few months thanks to the variables explained in Penny Stocking, Pennystocking Deux dvd’s and a nice wakeup call from Investorslive by calling me “lazy” when I asked him a lazy question on twitter. I received yet, another wakeup call soon after I read about a trader nearly destroying his own trading account due to his own ego and ignoring his past education from Tim. (see details)

I became deeply concerned not only for myself but for other new traders on planning more aggressively when to take losses quickly. Since I was going to be short selling for the first time I didn’t waste any time and purchase the ShortSelling dvd and since I needed to become better at reading candlesticks, I purchased Steve Nison’s Japanese Candlestick Charting Techniques as well.

My first short sell trade after watching the dvd was with Glu Mobile Inc. (GLUU) was on Thursday, September 1, 2011 with Speed Trader (On Tim’s list of brokers) and I loss about $120 which could had been a lot worst if I allowed my ego to make the trade for me instead of sticking with my reasonable plan I mapped out the night before. I entered the trade short with 2500 shares around 10am because I seen in the past there was a morning spike and fade for 3 days straight. Once I was in the trade I was up $25 bucks but things begun to change quickly and the stock displayed signs of going up. I decided to trade safely by selling and reentering but I end up receiving a bad fill for only 1300 instead of 2500. I tried to sell the other half but end up buying more shares to short by mistake. I was able to get out all my trades with that cost me $120 and a loss of two day trades. I was very happy that I planned the night before and my main goal was to cut losses because later the stock went to $3.88 but faded as I expected.

Yes, this was a bad trade but it was still good planning the night before in my journal (only .99 cent guys). Also, understand that my account is under $25,000 and I’m limited to three trades in a 5 day business cycle therefore, I don’t just click and short sell anytime I want just because I have 3 day trades to use as if I’m vegas trading instead of trading with a plan.

I believe cutting losses quickly is very important when it comes to trading and a loss just means that you was wrong for that trade but allowing a loss to grow because of not cutting it quickly is a whole different problem. I think about it would you allow a spilled beverage to spread without cleaning it quickly after a spill?

Many people clown Tim for cutting losses so quickly or for not holding a stock longer but in trading ego, doesn’t make you a good trader it is what you do after you are right or wrong while in a trade. With small account like mines I can’t ever afford to grow an ego.

Posted in Trading Losses

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  • steve

    This is a terrible lesson on how a beginner should trade.  Not because you cut losses quickly, that was good.  But you were trading way too much size for a $500 account, or even $3000.  What if the stock got halted intraday and then gapped up a buck?  What if your internet froze and then by the time you got it back major momentum had arrived and moved it a buck against your position.  Sure these are unlikely occurances but the fact is they COULD happen.  So consider yourself lucky and stop going all in, with margin, on one position, if you want to stick around for the long haul.  Just like Barron, you make yourself look like a much better trader than you actually are because you’ve taken risks but had a lucky streak.  The risk you were taking on with this trade is off the charts.  Sure, you can always argue that it’s only $500 and you could easily refund the account.  But someone reading this story might be trading with $100K and think “okay, if he can go in with 2500 shares that means I can go in with 500K shares”.  Oh, and add Nassim Talibs “Black Swan” to your reading list…you need to be aware of the possibilty of “black swan” events.  They are by definition very improbable but nonetheless a possibility.  He writes about traders who grew their accounts very fast by taking on a lot of risk (which didn’t seem risky at the time) but were eventually annhilated just as quickly when the market did what they thought it could never do.

    And Tim, shame on you for telling us this is a “great lesson”.  Going all in is not a great lesson it’s a recipe for disaster.  Just ask BK!

  • http://www.timothysykes.com Anonymous

    uhhhhh i grew my $12k to $2 million by being aggressive, not being a pussy…when u have nothing, u have nothing to lose…i teach to trade very conservatively  but when u have so little, fuck it, might as well work at mcdonalds if u dont wanna be aggressive

  • http://www.timothysykes.com Anonymous

    and BK blew up not by betting too big but being an egotistical moron who refused to cut losses quickly

  • steve

    Yeah Tim, but if you had kept trading that way you probably would have turned the $2M back into $12K.  You did that when times were good but it almost surely would’ve killed you in the end had you kept trading that way.  And in some ways you were lucky, others who were going all in during that time probably weren’t as lucky…(maybe they ended up going all in on a stock that got halted, etc.)  And yes BK was being an egotistical moron AND betting too big. 

    And I agree, if you have so little, fuck it.  But once you get some respectable capital, even just $3000, you should get out of that habit.  But it might be safer to never get in that habit in the first place because it is addicting.

  • http://www.timothysykes.com Anonymous

    no i did that when the market was bad too, u need to study more and stop making dumbass assumptions…no way to lose a lot when u focus on fast loss cutting, just like the post says, my god 

  • http://twitter.com/JLex24 JLeX24

    Steve, I guess you miss the whole point about cutting losses. You wrote a whole paragraph that was worth nothing because if you read my first post you wouldve realize that my main broker is Think or Swim and I opened this account because I’m under the PDT rule and I want to have more trades on deck. Second, I didn’t go all in because I had saved 15k so far this is why I haven’t been trading as late. Anyway, in closing this worthless rebuttal BK didn’t blow from being aggressive he blow because of his “ego”. The guy Bk said “if I get squeezed 3,000 I will not cover” Isn’t that a recipe for disater?

  • http://twitter.com/JLex24 JLeX24

    I’m tired of all you haters. It was another guy who turned 3k into 11k and you guys cried about that.You guys even hated on lx21 about his trading, Tim did make his first million trading 100 shares per trade or focusing on other dumb. If watched Deux you would had know that Tim was aggressive at first because he was under the PDT rule! Stop hating because you are one of the same clown saying Tim trades to cowardly!

  • http://twitter.com/JLex24 JLeX24

    Steve is such an idiot…I can’t short with an $500 account by the way. If I had hold 500 bucks how the heck Im shorting? If a person was reading this article than starting with 100k it would be wise to watch Tim’s dvds and not listen to idiots like you! I heard this saying “Everyone can tell you how to do but they never did it” Where are your trades at?

  • intellect

    At what point do you cut losses?  A little beyond the daily trading range? AT a certain percentage point? 

  • http://twitter.com/JLex24 JLeX24

    Great question! I like to cut losses by 5% but with that loss it was a little more because I made a mental mistake but still had cushion because I had a plan. I’m still learning just like everyone else

  • intellect

    Do you think I should buy puts for GORO based upon the thestreetsweeper article?  Any ideas?

  • http://twitter.com/JLex24 JLeX24

    Ummm I’m not a stock picker rather, a student who did a post. Watch some dvds

  • intellect

    Yeah, okay but are the dvds about options? 

  • http://pulse.yahoo.com/_WDVGW2J7GQRAPX76WM3LVNIN74 RicoR

    Great article…great point…i still struggle with this issue often…Its tough…trading is a total mind game.  Its all psychology and discipline, master these two and you have won half the battle…I am still fighting.

  • http://www.facebook.com/profile.php?id=100002820647760 Tom Nguyen

    Wow Must have been a lot of work. You did well congratulations. I was able to turn $500 into little over $1500 for over 34 days span in stock option but wasn’t as good as you.

  • http://www.corporateyoungster.com Corporate Youngster

    Wow Must have been a lot of work. You did well congratulations. I was able to turn $500 into little over $1500 for over 34 days span in stock option but wasn’t as good as you

  • http://www.corporateyoungster.com Corporate Youngster

    Haha I like that attitude. I was like that myself before and loss quite a bit but now finally turn around and start over. I start trading more conservatively now but is all good. Everyone has it own unique trading strategy. Congratulation to you timothy.

  • Pingback: The Gorgeous Trader Whose Turned $10k Into $50k In A Year (And She’s Speaking At My Vegas Conference)

  • http://www.facebook.com/profile.php?id=1848420220 Larry Both

    fffff

  • Livvarachi

    It would be quite difficult to turn $500 into $3,000 using Speedtrader when Speedtrader has a $3,500 account minimum. I’d hate to say that this person is one of many split personalities I have been tracking on the net. :S

  • Badisse

    You should use Alliance in Jamaica. They are not subjected to the $25,000 rule and you can day trade all you want with $2,000. Plus, they give you a 4:1 margin account.

  • http://twitter.com/JLex24 JLeX24

    So sad that I had stop my market studying to answer this nonsense! I have 3 accounts one speed trader, think or swim and the other etrade. I turn 500 into 2k starting think or swim and opened up other accounts like Tim advised in his dvd’s. You guys wonder why you keep losing money? It’s because you don’t read or listen to simple instructions! Speed trader doesn’t have 3,500 account min. so please get your facts correct before attack someone else hard work. I don’t have the patience, time or the account size to keep going back or forth with crap. I guess reaper was right when he told me ” Stop listening to idiots”

  • http://twitter.com/BullMaster87 BullMaster87

    what a pos reply…if u really traded you would know that if you cutting losses fast is a major part of staying in the game…DUH so you just said a bunch of NOTHING…lmao

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