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7 Crucial Trading Mistakes That Can Sabotage You

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Written by Timothy Sykes
Updated 4/13/2023 6 min read

Many folks are their own worst enemy when it comes to achieving success.

It’s a shame seeing traders sabotage themselves by making mistakes that are easily avoidable.

All of my millionaire students know it takes discipline, patience, and a willingness to want to improve daily.

But before any of them could think about making money, they had to eliminate the waste.

Here are seven crucial trading mistakes you must avoid…

Mistake #1: No Risk Management Plan

The only reason why I’m still around after +20 years as a trader is because of my ability to cut losses quickly.

I’m not the world’s best stock picker…I’m not a great market timer…and I certainly don’t pick tops or bottoms that well.

However, you don’t have to be the best if you are disciplined about cutting losses quickly.

If you’re a newbie trader or someone who isn’t profitable yet…

  • You want to know in advance what your targets are: One for profits and the other for cutting losses.
  • How much you want to make and what you’re willing to lose: Risk vs. reward.
  • Have a max loss number in place. Set limits on how much you’re willing to lose on one trade. If you reach your limit, close out the position. You can also set a limit for the entire day. If you exceed it, you stop yourself from trading the rest of the day.

You’ll have greater flexibility to bend the rules once you’re consistently profitable. However, in the early stages it’s important to stay disciplined and respect your risk rules.

Mistake #2: Bouncing Around

stocks for beginners how to trade stocks step by step

Options, swing-trading, scalping, momentum, short-selling…

The list of strategies goes on and on.

Which one is the best?

The one that works for you.

However, discovering what it is takes time. One huge mistake I see from newbie traders is bouncing around from strategy to the next. It’s hard to improve and get better if you’re constantly changing your approach every time you have a losing trade.

Mistake #3: Trading Without A Plan

Most good traders have setups, catalysts, and patterns that they like to trade.

By defining what they are, and tracking the results, they are confident at knowing what their strengths and weaknesses are.

Which allows them to trade with a plan.

You know how losing traders do it?

The jump into trades without targets, without a thesis, or a plan on how to trade it. Everything is random for them. And their results suffer.

A plan should consist of the catalyst driving you to make a long or short entry, as well as, written out price levels where you plan to take profits or cut losses.

Of course, a trading plan can be more elaborate, but it’s always better to keep things simple in the beginning. 

Mistake #4: Relying On Memory

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I tell my students to study.

Study their trades, study the trades they missed, study the patterns and catalysts working in the market right now.

The easiest way to do that is to keep a journal.

You can find me on Profit.ly.   

Let’s say you place two trades per year. There are 252 trading days in a year. That means you would have placed 504 trades.

How could you possibly remember those trades using memory?

You’re doing yourself a disservice by not recording your trade history and keeping a journal.

Not only will it help you discover your strengths and weaknesses faster. It will also help you work on the mental and emotional side of trading.

Mistake #6: Trading For Thrills

Good trading requires patience and discipline. However, most traders are adrenaline junkies…they thrive off action.

The only problem is that there isn’t much action in the market right now.

That means traders are settling for subpar setups and letting FOMO get the best of them.

I know it is for me this month. I’ve been trying to make money, forcing the action, and have gotten stung.

Trading is not F1 racing.

Sure, it can be exciting to make a lot of money in a single day.

However, you want to do that by following your rules and being disciplined.

The more you focus on the process and execution the better you’ll do.

The more you focus on trying to make money the less likely you are to make money.

I know, it’s twisted, but I don’t make the rules.

Mistake #7: In A Hurry To Get Rich

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Many people hear about the success stories and are inspired to join my program. 

The ones who do the best, are the ones with the right expectations.

For example, Jack Kelloggg, has made over $10.5 million in trading profits in less than 3 years…

But he didn’t make a single penny in profits his first year. In fact, he lost $2,600.

Most people would have given up after those results in year one. However, Jack knew that it would take time for things to click.

He was encouraged to see the plays working and others make money. He just had to make a few adjustments, continue to study hard, and learn from his wins and losses.

The bottom line is you have to be process driven and not money driven. Focus on developing and learning the skills needed to be a successful trader. 

If you’re looking at get rich quick gimmicks… then my program isn’t the right one for you.

But if you believe that if you work hard and follow the process that you deserve great things to happen to you…then click here for more information. 

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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

* 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”