The stock market has been absolutely crazy the past few weeks. But don’t let yourself think that all these stocks will keep spiking or bounce perfectly. Getting sloppy or not cutting losses quickly can lead you down a slippery slope.
A reminder…
Table of Contents
Markets Closed Today for Presidents’ Day
Officially the markets are closed for Washington’s birthday. Since we celebrate it as Presidents’ Day … we’ll call it that.
Enjoy today. Take some time to be with your family. Then use it to study. Prepare for the week ahead.
How to Build 20 Schools
I donate 100% of my trading profits to charity. 2021 has been amazing so far — I’ve made $428,122 in trading profits.* I don’t say that to brag, but out of gratitude. This bubble market is helping me to help others in a big way.
(*Please note: My results are far from typical. Individual results will vary. Most traders lose money. I have the benefit of years of hard work, dedication, and experience. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)
Partnering with Bali Children’s Project, Karmagawa has funded 23 school/library projects. Our goal is to build 1,000 schools worldwide, so we have a long way to go. But with what I’ve made from trading so far this year, we can fund 20 more schools in Bali.
As you learn and grow as a trader, I sincerely hope you discover the joy of giving back. The more traders who give a percentage of profits to charity, the better. Together we CAN change the world. Learn more about Karmagawa here.
“Try and fail, but don’t fail to try.” ― John Quincy Adams, 6th U.S. president
Let’s get to trading because this has been a crazy week and it’s a good reminder…
Trading Mentor: Avoid the Slippery Slope
This market has made some people get a little off track. So use today to get back on track. Take a deep breath, step back, and look at it as an opportunity to grow.
This market is FULL of opportunity & you should maximize it, but never forget that losses, especially big losses, hurt not just financially but also mentally too. Successful trading is all about proper perspective & discipline & when that starts to go, it’s a VERY slippery slope!
— Timothy Sykes (@timothysykes) February 11, 2021
Many of you reading this haven’t seen a stock market bubble. I have, albeit 20 years ago. But the market today is very similar to what it was back in 2000.
So while it’s important for you to maximize this market, it’s also important to have perspective.
“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger — but recognize the opportunity.” ― John F. Kennedy, 35th U.S. president
I’m not saying this market is a crisis. But the parallels are eerie. There’s a ton of opportunity, and there’s also danger. You MUST prepare for both. Don’t take trades you’re not ready to make. And ALWAYS follow rule #1 and cut losses quickly.
Now let’s dig into this idea of a slippery slope because I say it all the time. There’s a good lesson here…
Slippery Slope: Logical Fallacy or a Means to Growth?
I graduated from college with a degree in philosophy. One of the many mind-opening ideas we learned about was logical fallacies. So when I say trading a certain way leads down a slippery slope, I know it’s a logical fallacy.
What do I mean by that? The slippery slope fallacy says if you do A, it leads to B, which leads to C, which ends with D. Therefore, A leads to D.
Most of life doesn’t really work that way. And trading doesn’t work that way either. It’s tough to prove bad trading habits during a bubble leads to a blown-up account when the market shifts.
But hear me out…
I’ve been trading and teaching for a long time. I’ve seen enough traders blow-up to know that trading without rules is dangerous. (I trade using these rules.) Most traders lose because they’re not prepared and/or don’t follow rules.
But even experienced traders lose some of the time. The goal is to lose as little as possible by having a trading plan with well-defined risk. And by cutting losses quickly. So what about taking big losses?
That’s what I’m trying to help you prevent.
Take No Loss in Vain
A lot of big losses come from getting sloppy or losing discipline. But the real problem with losing discipline goes beyond financial losses. Lost confidence and frustration can hold you back for a long time, even after you make up the financial loss.
Remember, losses are not the end of the world. But you MUST follow rules and pay attention to the right stocks. Learn from your losses. No loss should be in vain. If you lose on a trade, use it to learn what NOT to do.
When trading seems easy because of a bubble market, it’s easy to push boundaries. It’s easy to get into bad habits. If you practice bad habits in a bubble market, you might make more money. But you’ll do it trading in a very risky way.
Inevitably, it will lead to a big loss — bigger than you’d normally take. And you’ll lose more in the long run. Trading is risky, but you do NOT need to take 30%‒50% losses. Doing so is a sign you’re headed down the slippery slope.
When you do take a loss, you have a choice. Some traders think the way to get back what they lost is to continue with their gunslinger mentality. But I believe there’s a better way.
It’s tough to deal with losses/days like today, but you must learn from your mistakes & you’ll look back at today with gratitude for helping you better understand the risks/downside of being sloppy/undisciplined/over-aggressive just like when I lost $500k in 1 trade 15+ years ago
— Timothy Sykes (@timothysykes) February 11, 2021
How to Avoid the Slippery Slope
Trading is all about having the right perspective and discipline. It’s not about whether a company is good or bad. And it’s not about the hype being pushed by BS promoters.
Too many newbies say, “I’ll just hold forever. I trust the promoters. I like this company and its world-changing tech…”
I know it’s tempting to just be lazy/groupthink with so many different trading mobs these days, but trust me it ALWAYS ends in bloodshed as $GME $AMC $KOSS $SNDL $TLRY newbies are learning the hard way, you MUST study up/be meticulous & self-sufficient, NEVER rely on anyone else!
— Timothy Sykes (@timothysykes) February 12, 2021
Don’t let yourself develop bad habits. You might make money in a bubble market. But you’ll get crushed when the market changes.
And remember…
Take It One Trade at a Time
In this bubble market, I miss trades every day. That’s OK. Don’t feel bad if you miss a trade. Focus on what you CAN do. Focus on the process and take it one trade at a time. Don’t get ahead of yourself because the market is hot.
“Do what you can, with what you have, where you are.” — Theodore Roosevelt, 26th U.S. president
Start Small
There’s no need to take big trades in the beginning. And there’s no need to take big losses. Every trade is part of your education. If you can’t afford to lose anything, then paper trade using StocksToTrade.
(Quick disclaimer: I proudly helped design and develop StocksToTrade and am an investor in it.)
But maybe the easiest way to avoid the slippery slope, in the beginning, is to trade small…
If I was just starting now, no way would I trade with large size, or even medium size…I’d probably be trading with 100-1,000 share positions to start, or even paper trading @ @StocksToTrade & learning/optimizing as much as I can & only thinking about scaling up after 2-3 years!
— Timothy Sykes (@timothysykes) February 11, 2021
Feel free to get more aggressive later in your career. For now, learn from this bubble market and stay in the game. Watch this video for my…
Top 10 Tips to Better Your Trading for 2021
Have patience. The stock market will be there for the rest of your life. Follow the tips. Avoid the slippery slope.
Let’s review a trade…
Trade Review
There were so many plays last week it was crazy. This was my biggest dollar win*…
Tesoro Enterprises, Inc. (OTCPK: TSNP)
TSNP is one of my biggest winners in the past couple of months. The promoters did a great job getting it from sub-penny to $1.93 per share. Some are even calling it “the next PayPal.” Remember, you can ride the hype, just don’t believe it.
I’ve made over six-figures on this one stock.* Check out the TSNP chart from February 9 with my entry and exit comments…
TSNP has been on my watchlist consistently for the past two months. And I’ve seen how it bounces when it panics. Most of my TSNP trades have been morning panic dip buys. So this trade was just a matter of knowing what works best for me and doing it.
That comes from experience. Notice I sold into strength when it hit my goals for an $11,141 win.* Singles add up.
(*Please note: My results are far from typical. Individual results will vary. Most traders lose money. I have the benefit of years of hard work, dedication, and experience. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)
Millionaire Mentor Market Wrap
Back in 1999 and 2000, as a freshman in college, I made a ton of money in a bubble market. I’m very grateful, but more for the experience than the money. Most traders have zero experience trading this kind of market. So they push it.
Read chapter six of my book “An American Hedge Fund.” It goes over my first six-figure trade when I was a freshman.
But also pay attention to chapters 11 through 15. (Read the whole book. It’s free to download with the link above. And it’s an eye-opener.) Those chapters describe my biggest loss. Without that loss, I wouldn’t be the teacher I am today.
Learn from experienced traders. There are a lot of very experienced traders staying on the sidelines right now. I’m partaking in the bubble market — but in a very conservative way.
So do yourself a favor and avoid heading down the proverbial slippery slope. Focus on the process, find what works best for you, and follow rules.
For me, when the market changes I’ll be ready because I lock in profits. Sometimes too soon … but it protects me from giant losses.
Trading Challenge
Some of my students are reporting huge winning days recently.* But you have to understand they’ve studied for years to prepare for this market. What have they been studying?
They all took up the Trading Challenge. It’s not easy. Not everyone who applies gets accepted. And not every trader who gets accepted studies hard enough to achieve success. Will you?
Apply to the Trading Challenge today.
What are you doing to avoid going down the slippery slope of undisciplined trading? Comment below, I love to hear from all my readers!
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