20 Lessons From $2 Million In Losses - Timothy Sykes

20 Lessons From $2 Million In Losses

Before I talk about the not-so-fun losses some traders have experienced the past few weeks, please wish this great trader up $1+ million in 2014 a happy birthday today, we’re having a special 72 hour blowout sale HERE on annual newsletters and 50% off DVDs HERE in his honor!

 

I’ve had a pretty steady few weeks of trading as in the past 30 days I’ve profited nearly $40,000 and in the past 90 days, I’ve made $140,000, see every trade detailed HERE, and while that sounds good, I’ve left TONS on the table mainly because my position sizes have been so small due to spending the majority of my time planning my annual conference, and now dealing with all the new students who have found me due to this great Men’s Journal feature article and this pretty embarrassing TV show on Bravo (I’ll live…I do everything, whether it turns out good or bad, to find more dedicated trading challenge students)

Download this case study in a PDF form.

Now onto discussing and learning from roughly $2 million in losses, 2 great traders have suffered the past few weeks. I absolutely HATE seeing big losses so I’ll be giving a free webinar this coming Monday night, register HERE on October 27th, 2014 on how to adapt to this crazy market right now.

First is up is my top trading challenge student Tim Grittani, who despite his recent $300,000ish in losses has still turned $1,500 of his own money into $2.1 million in less than 4 years since becoming my student, a remarkable achievement indeed, see his profit chart and understand that while his recent losses are hurtful, he’s come a loooooong way in a very shooooooooort period of time:

grittani chart overall

See his roughly $300,000 loss shorting LAKE too early (even though he’s eventually have been right for roughly $5/share a few days later)

Tim wrote a MUST READ blog post “Lessons From My $290,000 $LAKE Loss

Key takeaways:

1. Before we get into some of the specific mistakes I made with LAKE, we need to examine the underlying problem. This underlying problem was present in my trading all summer, ever since I started transitioning over to listed stocks. What was this problem? My unwillingness to cut losses when I shorted momentum runners too early.

2. As far back as July, I knew that I was playing with fire. I even went so far as to predict that my stubbornness would badly burn me eventually. Yet despite knowing this, I refused to make a change. I’m not sure whether it was due to pride, fear of exiting at the top of a spike, or perhaps just the thrill of turning a loser into a winner. Whatever it was, the problem only got worse.

3. While in the back of my mind I kept thinking, “Eventually this won’t work out,” my bad habit kept being rewarded with narrow escapes and sometimes even solid profits. Link I knew my trading style was broken, but the results never showed it. In fact, I was even rewarded with my most profitable trading month ever in September! I continued to play larger and larger as the gains poured in, refusing to address the underlying issue. Then LAKE came along, and the wheels came off.

4. To push for a break-even or better month when I know I’m not mentally right would do nothing more than put more of those gains in jeopardy, and I refuse to do that. So I will take a much needed break from trading, my first vacation in quite awhile, and I will come back refreshed in November for a fresh start!

I’m proud he recognized he was breaking these key penny stock trading rules and while I HATE seeing big losses, it’s better to lose, sometimes even lose big, if it stops you from breaking rules as rule-breaking will crush a trader longterm while losses, even this size, will only keep you down in the short-term.

It’s only been a few days into Tim Grittani’s vacation, but he can’t help but trade and he took a good trade just yesterday so his mind is back on track:

Onto the larger losses of roughly $1.7 million from this great and somewhat unknown penny stock trader who also likes to short sell penny stocks and pumps just like the rest of us…like this veteran trader he makes several million dollars per year on this strategy.

He wrote a great post on his losses HERE, but the contents are FAR too valuable to just be on Twitlonger, they must be posted again and again for all to see and learn from as David had a $1.3 million drawdown and then another $400k drawdown, altogether $1.7 million in losses on undisciplined trading…little different from Tim Grittani’s $300,000 in losses (hence where I get the blog post title regarding $2 million in losses)

Here are these great lessons you MUST memorize…mainly over-trading and taking too big position sizes:

What went wrong and what I’m doing to get out of this hole

On Friday, I actually hit a brick wall and froze which is a sign I hit rock bottom and compounded my losses that day. After I came too, I decided to liquidate all my positions. I also calculated my PL and looks like I back near the lows of my draw-down. To recap, around mid August, I was up around $4.6 million for the year but then my trading took a turn for the worst and in September, my accounts went from UP $4.6 million on the year to only up $3.3 million ($1.3 million draw-down). In late September and early October, I started recovering slowly and my accounts grew to up $3.7 million on the year but since then, I’m back down near the lows around $3.3 million. Although I thought I was making the necessary changes to my trading, my PL showed different. This has lead me to start analyzing myself and get it right this time around.

Here are some thoughts on what I was doing wrong…

1) My position sizing was way off. I got use to trading bigger and bigger but when I went cold, I still wasn’t able to adjust and kept trying harder and harder to make it back so was sizing into all my trades instead of trading the “fun” trades small and waiting for good to great setups to size in.

2) I am very competitive and strive to be the best at anything I have a strong passion for. Because of this, I am always comparing myself to others and putting my self-worth on my trading performance rather than who I am as a person. When my trading was going good, I become over-confident and start taking more risky trades which leads to inconsistency and eventually lose money and creates this downward spiral that I’m in. By trying way to hard to recover, instead of trading getting better, it actually gets worse and causes me to be more stressed, emotional, and frustrated.

3) Instead of going back to what I’m great at, I started trying anything and everything. For example, I normally don’t go long stocks and I almost never buy bounce plays. This month, I believe most of my losses came from going long instead of shorting penny stocks which is my core strategy.

Recap…………………………….

When you are in a trading slump, you should do the following….

1) Trade smaller and slowly size up as profits grow
2) Don’t compare yourself to others
3) Take only the best of the best trades (must be part of your “best” strategies)
4) Liquidate all holdings and start fresh to reset
5) Analyze, study, and analyze some more on what went wrong
6) Go back to your best strategies
7) Don’t try new strategies until you have fully recovered emotionally
8) Don’t try harder to make the money back, instead, trade less and wait

Posted in Fess Up Time

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15 comments

Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

  1. 2richard1

    Tim you might want to put penny stocks into two categories fixed and variable like an accountant. You specialize in variable constantly changing stocks reaping a harvest from shorting the pump and dumps. That’s working great a complement to that might be a reputable newsletter out there that focuses on buying and holding to represent the fixed part of the pennies. Newsletters that require a face a phone number and not
    spending money on research but is independent of that might be a tiny portion of
    the portfolio. Just a thought but potential of pennies is amazing thanks for the knowledge I have gained so far.

  2. Axel

    I completely agree with waiting, or sitting out. Before I got sucked into the penny stock world (before joining the site) i was long and holding buying into the hype that i was going to be rich, in a sub penny stock, MDNT 30k+ in gains, and it eventually went back down to 0, same with PHOT. 40k+ in losses between the two, then it put me in a downward spiral, new strategies, eventually in one year taking my portfolio from 120k down to an abysmal 30k, i stopped trading, waiting for a month, settled down, now in the past 10 weeks turning the 30k into 46k. It gets tough when you have a good week, and make 10%-20% (of your total portfolio, not just your investment) you get jumpy and greedy, and over confident, and I wish I had more power to just walk away in days or weeks like those, and just focus on my other job.

    I’ve decided to not stick any more money into my account until I grow this account enough year over year to be confident enough to stick 2 or 3 hundred thousand in there. I’m actually lucky i couldnt or haven’t been able to get shares on LAKE, that stock is nuts.

  3. Sara Franciszka Lentz

    Very much enjoyed reading this because of the very important self-analysis aspect which so many other traders disregard. Know thyself ;))

  4. Brian

    I’m getting this on the link: Requested Resource Not Found

    Sorry, we did not find the resource you were looking for

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  9. OceanRider

    ink TG’s post on his biggest loss was really good and from his post, I look at trading a lot different regarding losses. First, I see the whole entry and exit as an exchange where the market is always looking to take your $$$. That is the market goal. So, if you have a win, any win, whether big or small, you are going to give it back. Being successful requires all traders to realize that it is not enough to think, “I just had a win”, I am safe, and that last trade is safe because it is closed because at some point, another trade will be taking it back and if you are in a new trade, you are active in the market taking process. This is a tug of war where you mostly lose, sometimes win. In order to come out on top, the only way to go out ahead is to focus more on giving less back to market. After all, when a trader enters usually, it is with the expectation that they will be looking to make money. However, the proper attitude right from the start should be, that by entering a new trade, they are giving the market an opportunity to take your last win, to take your account, to take your time, or ALL OF THE ABOVE.

    TIM, I believe this is why, as you say, you trade “like a coward”. It makes sense. Going into a trade everyone needs to think like this first. The market is looking to get paid first at your account expense. I suspect that this is why traders with less than 50% success can be successful, and those with 70% can be standing still or still losing. I hope this post helps someone down the line. I am going to post this on Profit.ly later as I think this might help people in their quest to “Cut Losses Quickly”.

    My # 1: “Recall that the Market wants to get paid at my expense”
    My #2: “Cut Losses Quickly”
    My #3: Focus on researching and building datasets that highlight a pattern’s probability/odds for winning
    My #4 Trade Only highly reliable patterns (with 80%+ odds)
    My #5 Eliminate the noise

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