timothy sykes logo

Mentor Updates

Millionaire Mentor Update: Avoid the Slippery Slope

Timothy SykesAvatar
Written by Timothy Sykes
Updated 1/24/2023 12 min read

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…

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.

education is a way to avoid the slippery slope
© Millionaire Media, LLC

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

Millioniare Mentor Update Avoid the Slippery Slope
© Millionaire Media, LLC

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.

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?

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

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.

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…” 

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…

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 chart: February 9 intraday, morning panic dip buy — courtesy of StocksToTrade.com
TSNP chart: February 9 intraday, morning panic dip buy — courtesy of StocksToTrade.com

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.

watchlist banner

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!

How much has this post helped you?

Leave a reply

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”