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Trading Lessons

3 Mistakes Robbing You Of Profits

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Written by Timothy Sykes
Updated 9/4/2022 5 min read

There are two ways you can help yourself make more money as a trader.

#1 Develop your skills by discovering new strategies and then scale up on your best ideas

#2 Find out what’s losing you money and STOP DOING IT.

Now, #1 takes time and commitment. And believe me, if you ask any of my 20+ millionaire students if it’s worth it…they’ll all say YES!!!

But before you can focus on #1, you must stop the bleeding.

And that’s what I want to talk to you about today…how you can stop the bleeding…and start becoming a consistent and profitable trader.

The market is filled with opportunities right now…

But there are three mistakes I see traders constantly make.

I’ll show you how to avoid them.

#1 Account Drainer: Not Adjusting To The Volatility

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I like trading volatile stocks because that gives me the best chance to turn around a quick profit. However, there are strategies I utilize to strengthen my odds of making money.

But what if you don’t have those same skills? What do you do?

Trade Smaller or Don’t Put On Your Full Position At Once

It’s easy to slap on size when you are trading low-dollar stocks. But it’s also easy to get smoked if you don’t have a good entry.

Figuring out if your entry is on point takes time and experience.

That’s why you should trade small first. It doesn’t matter if that means 1 share or 100 to you. Scaling up is easy when you’re ready…just add another 0 to your share size.

But now, you want to get comfortable with the volatility and the swings in the stocks you’re playing.

Don’t get caught up in how much other people are making or let it bother you.

We’re all running a different race. It took my student, Mark Croock, almost a decade to reach $1 million in trading profits. But this year alone, he’s had multiple six-figure trading days!

If you haven’t mastered any strategies yet, you should certainly be trading small or paper trading.

#2 Account Drainer: Setting Stops On Volatile Stocks

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Some of the most volatile stocks have super-wide spreads. And they tend to be thin. Using stops in situations in volatile stocks can be dangerous.

Why?

Because often, your order will get triggered and you’ll get filled way below your stop price. This happens much more with higher-priced stocks, but it can also happen with lower-priced ones.

Trading algo’s have a good sense of where traders put their stops. So they’ll violently send a stock down, wipe out all the stops, and then push the stock back up.

If it’s ever happened to you, then you know how painful and frustrating it can be.

Stop setting stops on volatile stocks.

Instead, manually exit the trade based on a level you want.

It may seem more difficult at first, but it will save you a lot of money from getting stopped out and filled at horrendous prices.

#3 Account Drainer: Adding To Losers

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Imagine owning a restaurant and doing an audit on your menu. And finding out that certain dishes don’t sell well at all.

Would you buy more ingredients for those dishes that didn’t sell well?

Heck no.

But traders do it all the time when they add to losing positions.

Once you become experienced and consistently profitable, you’ll know when breaking the rules is okay.

However, the name of the game as a new trader is SURVIVAL. And adding to losers is a big-time mistake.

Furthermore, when you add to losers, and it doesn’t work out, it can send you down an emotional spiral. Often leading to revenge trading and other reckless behavior.

Stop adding shares to crappy trades you’re in.

I want you to make money and be successful. 

Don’t add to losing positions. Your trading account and mind will thank you for it.

Bottom Line

Developing your skills as a trader takes hard work—like any worthwhile endeavor. As a new trader, your goal should be survival. That’s why you should first focus on stopping the bleeding.

Once you accomplish this goal…

Hit me up here, and I’ll show you how to develop your skills.


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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”