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Trading Tips-Tim Sykes Penny Stock

Cutting Losses and Brutal Honesty: Why Being Real Matters

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Written by Timothy Sykes
Updated 1/24/2023 8 min read

I won’t lie … being real is a lot more fun when you’re winning.

But part of being totally transparent is sharing your losses, too. That’s why I publicly post EVERY trade.

Recently, a trade went against me … I had my biggest loss in months.

My haters were eating it up: ‘Sykes is blowing up!’ 

I don’t care what they say. Yeah, I had a big loss. And yeah, it sucked. But I stuck to my rules, cut losses quickly, and moved on. And you know what? I ended up being profitable on the day overall.*

Too many new traders get traumatized by losses. They can’t cut the cord and move on. This is exactly why I’m being real about this loss — I want you to see that this stuff happens all the time in the stock market.

Trades go against you, even if you do everything right. Let’s talk it out so you can understand why cutting losses is SO important and why it’s so important to stick to the rules.

(*Please note: My results, along with the results of my top students, are far from typical. Individual results will vary. Most traders lose money. My top students and I have the benefit of many years of hard work and dedication. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.) 

Being Real About My Biggest Loss in Months

A lot of so-called gurus out there only post screenshots of their profits. You don’t know their account size. They don’t tell you things like their position size, entry, or risk.

They definitely don’t tell you when they lose.

They think they’re projecting an image of success, but really, they’re just hiding. Or even worse, they could be trying to take advantage of you.

I don’t hide anything. Being real means sharing everything — my entry, my position size, my exit, and my profit or loss. 

I do this because nobody else does. When new traders follow these fakes then lose, they feel shame. They blame themselves. They think penny stocks are a scam.

I wanna normalize losses because they ARE normal in the stock market. Being real about my own losses is one of the ways I try to help my students understand this.

This is why I started my Trading Challenge — to cut through the BS in the penny stock niche and teach new traders all the stuff I wish I’d known more than two decades ago when I started trading.

It Happened So Fast…

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Here’s how my biggest loss went down.

The trade was looking great. Everything was going according to my plan. I was up about 192%…*

But then, all of a sudden, Ambow Education Holding Ltd (NYSEAMERICAN: AMBO) crashed and halted.

The trade went against me. 

I hadn’t done anything wrong. I wasn’t trying some risky new strategy. It was one of my go-to setups, and I was following my own rules.

So when the trade went against me, I continued following my own rules — and cut losses quickly.

Even so, I was in the red. In a matter of minutes, I’d lost over $4,000. Here’s a detailed analysis of the trade:

But here’s the real kicker. After I cut losses, the stock spiked again. Check out the chart:

AMBO stock chart
AMBO chart, spike, crash, then re-spike on September 28, 2020 — courtesy of StocksToTrade.com

If I’d stayed in the trade, I could have been profitable. But here’s the part I wish I could put in 2,000-point type…

Cutting losses was NOT a mistake.

You Cannot Hold and Hope

Did you cringe when you read that part about how the stock re-spiked and how I could have been profitable? 

A lot of traders would lose their heads over it. They’d gorge on their own self-pity.

I won’t say it felt good to see the stock re-spike and realize I could have made money instead of losing. After all, more profits mean more money for me to donate to charity.

But cutting losses was actually the best decision.

In hindsight, it’s clear that the stock spiked again. But there was no way of knowing it would do that at the time.

The stock could have crashed and burned and my loss could have been even bigger. 

Point is — sure, maybe I could have made money if I’d done the ‘hold and hope’ thing just this once. But when you get in the habit of doing that, it’s like the kiss of death for your account…

It might not be this trade or the next one. But somewhere along the line, the bag-holder mentality will burn you.

Take the High Road: Cut Losses and Move On

When I had my biggest loss in months, I didn’t get angry about it or lose my mind or go get drunk.

What did I do? I got right back on the horse. I moved on to lithium-ion battery plays and former runners from the previous week. When you fall off, you get right back on.

And I ended up being profitable on the day — I made about $7K overall*, even after my loss.

This is why I constantly post commentary in my Trading Challenge chat room and make video lessons. I want you to learn from my successes — and my failures. That’s what being real means to me.

Want to keep learning the truth about penny stocks? Check out these two resources:

  • The Complete Penny Stock Course.” Written by my student Jamil, this book is the most comprehensive volume about my penny stock trading strategy.
  • How to Make Millions” DVD. This is still one of my top-selling educational resources … and a favorite among my top students. Plus, all profits go to charity!

It takes a lot of hard work to find consistency in the market. But it’s worth it.

Being Real About Following the Rules…

I don’t love losing. But being real about my losses is so important … I need newbies to understand that it’s not all about winning. Everyone loses, no matter how long they’ve been in the penny stock game.

For whatever reason, this trade went against me. It happens — the stock market is not rational. Sure, I could have gotten lucky if I’d stayed in the trade this time. But it’s so important to get in the habit of following rules. It’s when you start breaking them that stuff goes wrong.

Don’t complain. Don’t violate your own rules. If you’re losing, suck it up, cut your losses, and move on. Small gains that add up over time and minimizing your losses are the real keys to longevity in the stock market.

Do you understand why I cut losses on this trade? Leave a comment and say ‘I will cut losses quickly!’

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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”