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How Millionaire Traders Deal With Losses (6 Methods)

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Written by Timothy Sykes
Updated 3/20/2023 6 min read

Every great trader and investor, and especially every bad trader and investor, has losses.

It’s NOTHING to be embarrassed about as I stress this again and again in weekly webinars for my trading challenge students.

Heck, you can see I only win 72% of the time and I’ve turned thousands into millions…see all my trades HERE

The difference between being a successful trader/investor and a failure is that we successful people know how to deal with these losses.

We don’t freak out and start betting bigger in order to get bigger profits in an attempt to wipe away any trace of the losses from our accounts.

We don’t get too emotional and think our world is coming to an end.

We accept that every now and then we all make mistakes.

And we are determined to learn from our mistakes because we understand that failures and losses make us wiser and make us better and wiser in the long run.

The beauty of being successful an wealthy using techniques that we have learned over many years is knowing that we will come back from any losses because we are self-sufficient.

This is why I strive SO hard in creating self-sufficient millionaires, like this young man is well on his way being, not just copycat traders who can mimic my trades but don”t really understand them.

Read my best-selling book for free HERE for a limited time and see all the mistakes I made along the way while turning my $12k Bar Mitzvah gift money into several million dollars…it wasn’t a straight line up to millionaire by any means.

Learn from my biggest stock market loss of 2012 HERE

Learn from my six-figure loss that killed my hedge fund credibility (even with the loss of roughly 35%, my hedge fund still finished up 2%/year over 4 years…my haters like to say I “blew up”, nope, that’s reserved for a fake guru who likes deleting his trades from Profitly 🙂 )

And besides being all positive and wise about my losses, I also get ridiculously angry…and usually drunk…because I’m human.

Don’t try to ignore the pain because it will just well up inside you — don’t be afraid to let it out, ideally in some healthy fashion like a good workout or scream at the top of your lungs.

Perhaps watch inspirational videos like these:

But when you are ready to get back to trying to make money in the stock market, remember these 5 key rules:

1. Go back in with much smaller position sizes since your psychology is frayed

2. Sometimes I even watch the markets for a few days and make no trades whatsoever just to work out a few hypothetical trades in my head to see how I would do if I did trade with actual money

3. NEVER GIVE UP — most of my biggest losses have been followed by my biggest gains, I’ve simply mistimed the trade a bit, but that doesn’t mean my thesis is wrong

4. No matter the size of my painful loss, I take comfort in knowing I’m still in the game and can live to trade another day…the best traders do screw up, but we minimize risk because we realize no matter how good a trade or investment looks, we can always be wrong and if we’re absolutely wrong, we cannot, under no circumstances, risk blowing up and losing our nest egg and be taken out of the game…once you’re out the game, it’s much more difficult to get back in and be successful like before.

5. Call and see friends and loved ones who earn far less money than us…this makes us feel better about our choice of career and reaffirms our desire to succeed in this game…you need to stay hungry and prepared for more profits at all times and when you lose a lot of money, you just don’t feel like you have it in you anymore…resist the urge to give up…resist the urge to not do everything you possibly can to make back what you lost and more.

6. If the losses make you even more hungry for profits, resist the urge to make everything back and more RIGHT AWAY…you need to find the balance again of being able to profit off superior opportunities, but not force trades that aren’t great simply because you want to feel whole again.

Trading, like life, is all about balance.

I tell my trading challenge students the best trading mindset that I can teach them is to think of themselves as a retired trader who only comes out of retirement to take on great trades because if we missed those trades, we’d feel very guilty for wasting easy profits.

Trying to come back big too quickly after big losses prohibits us from implementing this highly reliable mindset and so you must resist the urge to make back all the $ too fast IF the trade setup isn’t there.

If it’s simply a case of mistiming and after you take the loss, the trade looks great again, double and triple check with yourself before betting again (using the pre-trade checklist I will be teaching at my upcoming Vegas conference October 12-14, 2013 (email admin@timothysykes.com for special earlybird discount pricing), but if you check out and the trade checks out, feel free to trade again and do what you have to do to get back in the groove of consistent but opportunistic profiteering.

Just remember, even the most successful people in the world have losses…look at this billionaire who lost tens of billions of dollars all within a year is is now worth a puny $200 million:

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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

* 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 (888) 878-3621 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”