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3 Strategies For Avoiding Impulsive Trading

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Written by Timothy Sykes
Updated 3/10/2023 5 min read

Very few things pain me more than hearing about traders who put in the work and study but fail to get the results.

I’m talking about those traders who know the patterns, have a deep understanding of catalysts, and can spot a good setup when they see it…

But for some reason or another, they end up taking bad trades.

It’s almost like they are purposely self-sabotaging themselves.

Most traders focus on several, if not dozens, of potential plays.

And to make matters worse, they are usually low-probability setups.

Trade enough of them, and you’ll soon be part of the 90% club—the majority of traders who lose money.

But if you’re reading this, I want to help you get out of your own way.

That’s why I’m going to share with you three powerful strategies for avoiding impulsive trading.

Strategy #1: Identify Your A+ Setups

high frequency trading
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There are several strategies I like to trade. Two of my favorites are Supernovas and The Weekend Trade.

I don’t feel like I trade these well…I KNOW.

You see, every trade I place is recorded in a journal, which you can see for yourself. 

Besides recording all my trades, I also review them.

I am trying to figure out if my thesis is correct or not. I’m also looking at my execution and trying to determine if I was early or late and if I should have held longer or shorter.

After that, I will ask myself if this is one of my A+ setups.

I consider myself a very disciplined trader. However, that doesn’t mean I’m perfect. Occasionally, I will take bad setups or rush into a trade.

But reviewing my trades lets me see what I’m doing right and wrong and what’s working and what isn’t.

Have you ever talked to someone with a hangover?

They usually say something like I’m never drinking again.

Well, reviewing bad trades can have a similar effect.

That’s why you shouldn’t sweep them under the rug.

You want to pay attention to your winners too. You want to continue doing what’s working. And by doing that, you’ll identify your best setups.

If your goal is to make money, doesn’t it make sense only to trade your best setups?

Are you less likely to make bad decisions if you clearly know your best setups?

Of course.

And that’s exactly how I teach my students to think.


Strategy #2: Stick To Your Trading Plan

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You can have a good thesis and a solid strategy, but you can still lose money on the trade if the execution is poor.

Just because I put a stock on my watchlist… it doesn’t mean I will be trading it.

I have to get the entry I want.

Lately, I’ve had my most success by trading stocks with strong weekly and daily charts. And buying them on panic sell-offs. I call this the panic dip buy, and when I nail it, it’s usually good for a quick 10-20% profit.

I’ve also noticed that the results aren’t nearly as good if I’m impatient.

Go back to your winning trades after you’ve found your best setup, then try to see how you play it.

If you’re a momentum trader, are you better at dip buys in the morning, or do you have more success playing the stock later in the afternoon?

What works for me might not work for you.

And that’s exactly what I tell my students. 


Strategy #3: Act like A Retired Trader

I have a life outside of trading.

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And I feel it’s important you do too.

Whether that’s spending time with your family and friends or a hobby you love…it’s good to get away from your computer screen.

My passion is charity. It doesn’t have to be yours, but don’t be one of those people who just want to eat, sleep, and breathe the stock market.

I tell my students to act like they’re retired traders. 

What do I mean by that?

Pretend you’re out of the game…and the only way you get sucked back in is if you see a setup so incredible it will make you feel bad for not being involved.

You see, so many traders are in front of their computer screens all-day just pounding away at their keyboards, jumping from one trade to the next.

But the truth is, there are only a handful of good trade setups per day.

Sometimes, there are none.

You probably want to make money immediately if you’re a newbie trader. And I get that. But only good trades make money. You don’t get paid for putting trades on.

That’s why I encourage you to think like a retired trader.

Only come out of retirement if you see a setup so juicy…you’d kick yourself for missing it.

Want to learn more about how I can help? Check this out!

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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

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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 (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”