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10 Rules For Optimal Trading. Do You Follow Them?

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Written by Timothy Sykes
Updated 4/18/2023 7 min read

Just saying you’re going to trade smarter and be more disciplined isn’t enough to change the tide.

After all, everyone who trades wants to make money.

Yet few do.

Why?

Short answer: they lack discipline.

I know, not a popular opinion, but the truth stings.

The best traders I know didn’t achieve their success randomly…

They followed a process and stuck to a set of rules.

After $7.4 million in trading profits and mentoring more than 30 of my students and helping them on their millionaire journey…I have developed a set of rules that have delivered some incredible results.

If you’re struggling right now it’s probably because you aren’t following your rules.

Or even worse…you don’t have a good set of rules to follow.

Here are my top ten trading rules…

 

#1 Cut Losses Quickly

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I have not been trading well at all this year. Yet, I’m still profitable.

Why?

Because I’ve mainly stuck true to my number one rule and that’s cut losses quickly.

Emotions and ego often make it difficult to follow this rule, but it’s essential to minimize losses as much as possible.

#2 Get Out Of Bad Trades

Admitting your wrong is not always easy. Sometimes as traders we can get stubborn. Instead of taking a small loss we hang on and hope for the trade to reverse. Or even worse, we add to the losing position, increasing our risk exposure.

That’s why it’s essential to get out of bad trades once you discover you’re in one.

#3 Small Gains Add Up

For someone to make $100,000 a year in the stock market they would have to average $400 in daily profits.

I made over $1 million in 2020 and I did it again in 2021, primarily trading small. Don’t get seduced by all the fake traders on social media who only post their winning trades.

You don’t need to swing for the fences to make a lot of money in the stock market. Small wins add up.

That’s why it’s important to focus on the process early on in your journey.

#4 Trading Isn’t Easy

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Don’t expect to get rich quickly when you start. Many of my top students didn’t make a penny their first year. Jack Kellogg who has made over $12.5 million in the last two and a half years lost money his first year.

It takes countless hours of studying, discipline and screen time to succeed.

#5 Learn What Works For You

My bread and butter is trading OTC penny stocks.

I have proven results trading them and it works for me.

However, it might not work for you.

And that’s what makes my coaching program so unique…

I don’t teach my students to trade like me, I teach them a process, and show them how to find their own way.

I’m proud that two of my students have surpassed me in trading profits. It helps prove my point that I’m a better teacher than trader.

Try different things out and when you find something that works for you…study hard to master it.

#6 Patterns Repeat

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Become a student of the game. Patterns and trends repeat in the market. Experienced traders recognize these patterns and use them to their advantage.

Take the time to study what’s worked in the past…it may do so again in the future.

By the way, this is one of my favorite patterns.

#7 Keep A Trading Journal

I have placed thousands of trades throughout my career.

There’s a lot of valuable information and lessons from those trades.

Keeping a detailed trading journal to track my progress, learn from my mistakes, and develop go-to patterns and strategies helped me out immensely.

If you’re not tracking your trades, taking notes on your trading, then you’re doing yourself a major disservice.

I like to track all my trades on Profit.ly.

#8 Work From Anywhere

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One of the benefits of trading is that you can do it from anywhere.

Trading is not location-dependent.

Go out and enjoy your life…don’t be a slave to your screens.

#9 Focus On The Process

Like I said, many of my best students struggled in year one and two. However, their goals were process oriented and not money oriented.

If you focus on making money early on then you’ll likely be discouraged from your results and probably give up.

Instead you want to focus on learning the patterns, catalysts, risk management skills, execution, and everything else that makes someone a good trader.

#10 Focus On Stocks In Play

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The best stocks to play tend to be volatile and experiencing above average trading volume.

It’s easy to get chopped up trading penny stocks if you’re trading stuff that isn’t volatile and doesn’t offer a lot of liquidity.

Avoid illiquid stocks.

Stick to stocks that have catalysts, strong patterns, and offer an opportunity to turn a quick profit.

Final Note

My trading rules go far beyond ten…

I just wanted to give you a glimpse at some of the stuff I feel is important. These rules don’t have to be yours…

However, you should develop your own set of rules.

It’s essential if you want to be a disciplined trader.

If you’d like to learn more about my latest training session click here for the details.


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Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (205) 851-0506 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”