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Trading Psychology

How Confident Are You In Your Trade Selections?

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Written by Timothy Sykes
Updated 9/19/2023 8 min read

Some traders simply can’t get out of their own way.

They’ll string a few good trades together, then get overly aggressive on a subpar looking trade and get wrecked.

But what if you could avoid those disastrous outcomes…

Better yet, what if you could stop yourself completely before even getting in a mess…

It’s possible…and I’m about to show you how.

Why Do Traders Self Sabotage?

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Now, I’m not a doctor, so please take this with a grain of salt. But I have turned a small amount of money into millions. And I’ve coached over 30 of my students on their way to becoming millionaire traders.

I’ve seen the best and worst over my 20-plus years in this game.

Here are some of the most common reasons why traders act against their own best interests.

  • Emotions. They let fear and greed override their rational decision-making. That’s why we see some traders hold onto losing positions longer than they should. They’re hoping it turns around.
  • Overconfidence. When you overestimate your abilities, it can lead to excessive risk taking. That’s why I say early success is one of the worst things that can happen to a trader. No surprise, my very best students struggled during their first year of trading.
  • Loss Aversion. Who likes losing? Not me. But in trading it’s part of the game. Some traders will refuse to take a loss because it means they were wrong. I believe in cutting losses quickly. You should too.
  • Confirmation Bias. Short-sellers love confirmation bias. That’s why they all huddle in the same places, and spew the same broken logic. They scream fundamentals when they should be focused on price action and risk management. Don’t always be hanging out with traders who only see trades the same way you do. Remember, there’s someone on the other side of your trade. Be curious enough to wonder what they see in the trade.
  • Revenge Trading. After a few losses some traders will get super angry. They’ll not only want to get their losses back, but they’ll want to do it immediately. But that’s not how trading works. You need good setups to trade. Rushing into another trade because you’re angry won’t help you get those losses back.
  • Lack of a Trading Plan. It’s very hard to make money when you randomly trade tickers without a plan in mind. Know your strategy, and have a plan on how to trade it. If you’ve been following the blog, you know I love trading panics and dip buying. If I’m wrong I’m getting out right away.
  • Overtrading. Sit in front of the screen all day and you’ll probably over trade. Some traders can’t help themselves, they want action all the time. I’m not going to lie, I’ve been vulnerable to overtrading in the past. To overcome it I will step away from my screen and do other things.
  • Burnout. You don’t have to eat, sleep, and breathe trading. You do however need to do your homework and come prepared to each session with a plan. But if your life is only trading then eventually you will burn out. That’s why I’m a huge proponent of getting away from the screen, enjoying life, and doing other worthwhile things besides trading.
  • Not Accepting Responsibility. Don’t blame lack of funds and resources for your struggles. There’s plenty of free resources for you to learn from on this blog and on my YouTube channel.

How Do You Make Better Trading Decisions?

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The Power of PREPARE: A Pro Trader’s Checklist for Success

In the world of trading, staying curious and questioning everything can make all the difference. When individuals approach me, asking the secret behind my consistent streak of successful trades, I open up about my guiding tool: the checklist. This isn’t just any list; it’s a tool honed over years that assists in making informed decisions. Let’s dive deep into my process, which revolves around the mnemonic ‘PREPARE.’

P: Pattern/Price

This is where the price of the stock comes into play. I zoom into its current state, identifying areas of support, resistance, and its behavior across different time frames. When analyzing a stock recently, I noticed a pattern I always look out for – the panic sell-off near the start of trading.

R: Risk/Reward

How do the potential rewards compare to the risks? It’s vital to balance them. I seek out trades that offer a risk vs. reward of 3:1 or more. Assessing the potential risks and rewards helps me gauge the overall viability of a trade.

E: Ease of Entry

Is there ample volume? Will the exit be smooth or rocky? Monitoring the stock’s price action provides insights into this. A stock’s liquidity and my ability to navigate it without hiccups is crucial.

P: Past Performance/History of Spiking

Here, I assess whether the stock has a track record of explosive growth or not. A stock with a history of significant moves often signals potential future activity.

A: At What Time Is It? / Personal Schedule

Timing is everything in trading. Sometimes, even with a promising setup, I might step back if other commitments or conditions aren’t conducive. It’s not just about the trade; it’s also about being in the right state of mind.

R: Reason/Catalyst

Every stock move is often backed by a reason or a catalyst. Whether it’s company news, sectoral shifts, or global trends, knowing what’s driving a stock’s movement is crucial.

E: Market Environment

While individual stocks have their dynamics, they don’t exist in a vacuum. The broader market mood can heavily influence even the most promising trades. Thus, always keeping a pulse on the overall market sentiment is non-negotiable.

Putting It All Together

After meticulously evaluating a stock based on these factors, I assign scores. A cumulative score of 70 or more catches my interest. Recently, after putting a specific stock through this process, it scored a 52. Interesting, but not compelling enough for me.

For those eager to integrate this method into their trading arsenal, I’ve made it even more accessible.

[CLICK HERE TO GAIN ACCESS] to the Trader Checklist Calculator. It’s a game-changer and absolutely free! So, are you prepared to elevate your trading game?

Why Stop Now?

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Now that you’ve got a better idea of what the pitfalls traders must take, and the makings of a good trade setup…it’s time to kick it up a notch.

I want you to see for yourself what my top students are doing to take advantage of this crazy market.

Yes, you heard me right…CRAZY.

After all, how do you explain some of the short squeezes we’ve been seeing. Like CCG on Monday, the stock went from $11.47 to $200 in just a few hours!

But it’s unlikely you’d even know about moves like that if you followed the mainstream financial media.

The thing is, plays like that are happening more than I’ve seen in a LONG TIME.

And I want to help you find them. That’s why everyday my team and I are hosting live training classes. 

We bring them to you at zero-cost. 

All you have to do is sign up and register.


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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”