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4 Steps I Used To Bounce Back From a Major Trading Loss

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Written by Timothy Sykes
Updated 9/5/2023 8 min read

Every trader knows that crushing feeling.

The weight on your chest when a single trade erases weeks, if not months, of hard work.

On May 26th, that was me—a staggering $27K loss in the ticker symbol EFTR. 

It felt like I’d been sucker-punched.

Doubt crept in.

But here’s the thing…I would either learn from it or dive into a deeper hole.

I clawed my way back, turning the crushing loss into a $31K gain in just a few months

Moreover,  I’m up over $25K in the last two months.

If you’ve ever found yourself in a hole, listen up.

I’m about to share the four steps I took to recover from my stunning loss.

These four steps were my lifeline. And they could be yours too.

Step One: Slow Down

jack and tim
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After taking a big loss, you naturally want to “get it back.”

The aftermath of a substantial trading loss often induces a whirlwind of emotions, from frustration and anger to desperation and anxiety.

It’s a psychological minefield. It’s natural to want to jump back in, fueled by the burning desire to recoup what you’ve lost.

But this reactive mindset, clouded by emotions, can be a recipe for further mistakes and even bigger losses.

I immediately put myself in “time out.”

I took a step back to analyze what went wrong objectively and assessed my trading strategy.

By slowing down, I allowed myself to trade with a clear mind and an analytical perspective rather than being driven by raw emotion.

Don’t get me wrong, this sucks. And it requires tremendous discipline.

But if you approach trading as a marathon and not a sprint, it can help.

 

Step Two: Focus On Your Best Setups

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It pays to do your homework.

Despite my long-term success, I still journal and review my trades.

Why?

It keeps me sharp.

If you review your trades then you know exactly what’s working and what isn’t.

For me, the focus has been panic dip buying on highly shorted stocks.

For example, last Friday, I saw a big crack in the crazy pre-morning spiker, EDBL.

Source: eTrade

The stock was as high as $4.48 in the pre-market…

I missed a few earlier chances to get in, so I patiently waited for a panic below $3.

I like whole numbers because I feel like that’s where many newbies will set their stops.

The algo traders know this… and push it down, get all the stops to hit, and then spike it back up.

I entered at $2.92 and got out at $3.23.

A very quick 10.6% profit. 

Looking back at my previous successful trades, I know this setup works well for me.

Now, I’m not saying it will always work. I have mastered several strategies throughout the years…some work better than others.

It all depends on the current market conditions—another reason you must constantly study.

Step Three: Cut Losses Quickly

tim sykes in arizona riding on a jeep
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You can’t afford another big loss when you’re in the hole.

Cutting losses quickly allows you two things.

First, find your rhythm after a trading slump.

In that first month and a half, I made around $5K.

I was trading super small, not focused on profits, but finding my rhythm.

Since July, I’ve been feeling better and getting a good read on the markets.

I’m slowly feeling ready to start putting on bigger trades.

None of this would be possible if I didn’t cut losses quickly.

Not only does it buy you time to find your rhythm, but it also puts less pressure to hit big winners.

Step Four: Let The Action Come To You

sun coming in on Sykes - arms out
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You got a better chance at finding Waldo than finding me…

That’s how crazy my travel schedule is.

I might not always be in a location that has good wifi, so I have to be extremely careful about the trades I place.

Over the years I’ve adopted the mentality of acting like a retired trader…that is…act like I’m retired…and only jump back into the market if I’m super compelled.

In other words, I see a setup so good, I would kick myself for not taking it.

And that’s how I traded last Friday.

For example, I spotted the ticker symbol MEDS and saw a beautiful dip buying opportunity.

It was trading above $15.70 in the pre-market…but I waited for the panic.

Source: eTrade.

I got my entry at $10.85 and was out at $11.48.

A quick profit of 5.8%. 

It’s been rinse and repeat lately with these plays.

And that’s how good trading should be.

It shouldn’t be hard or stressful.

You should let the action come to you.

 

Bonus Step 5: Elevate Your Trading with Expert Insights

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Sometimes, the best way to accelerate recovery and leapfrog your progress is by tapping into the expertise of those who’ve walked the path.

Trading, like any skill, is best learned with a mix of personal experience and mentorship.

Here’s the thing: you don’t have to do it all alone.

Whether you’re trying to bounce back from a loss, or just looking to sharpen your edge in the market, a deeper understanding and fresh perspectives can make all the difference.

That’s why my team and I host exclusive live training workshops. 

We deep dive into current market trends, dissect notable trades, and, most importantly, share actionable strategies that can be a game changer for you.

And the best part? We’re offering this invaluable experience at no cost to you. All you need is to show up, listen, and apply.

Ready to transform your trading journey?

CLICK HERE TO JOIN OUR UPCOMING LIVE TRAINING SESSION.

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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 (205) 851-0506 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”