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Trading Lessons

Don’t Make The Same Crucial Mistake I Did

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Written by Timothy Sykes
Updated 8/15/2023 6 min read

On Friday, I got into the ticker symbol EVLV…

It was a big earnings winner, which held its gains throughout the day and a pattern that reminded me a lot of AAOI, a stock that is up more than 680% year-to-date.

The plan was to get in on Friday and out on Monday for a profit, utilizing this strategy.  

I got in at $7.69 and was out of the trade on Monday at $7.98. It reached the $8.30s…but it was a nice win nonetheless.

I’ve been dead on lately…

And while it’s encouraging, I’m kicking myself for a crucial mistake I made…a mistake I see many traders fall victim to, whether they’re just starting or have years of experience.

But there’s a way to prevent it.

And it could be the key to unlocking the trading success you’ve always dreamed of.

Comparison Is The Thief of Joy

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One of the worst things you can do during your trading journey is compare yourself to others.

Never compare your chapter one to someone’s chapter five.

But I see it all the time.

Newbie traders rush to make profits…when they should be focused on learning risk management, trading strategies, and market psychology.

And because so many new traders disregard the fundamentals, they endanger themselves.

For example, a newbie short seller can win 10, 15, or even 20 trades in a row.

It can give a false impression that they’ve mastered the strategy. So they then decide to trade bigger and risk more on their next trade.

Little do they know that it takes one or two bad trades to wipe out dozens of winners. And before you know it, they’ve blown out their account.

Risk Management Is The Key To Long Term Success

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I haven’t been trading poorly this year.

But I’m just up $32K…

Why?

Because in May, I had one BAD trade.

Source: Profit.ly

One stupid mistake destroyed my psychology. And wiped out nearly all of my gains at the time.

Since then, I’ve been trading smaller to build my account back up.

So even though I’m seeing the market much better, I still haven’t gotten to the point where I’m comfortable trading bigger.

Think about it, I’ve made over $7.4 million in trading profits and have been trading for over 20 years, and despite that, a big loss still bothers me.

So I’ve had to play small ball and chip away.

Here are some tips to help you avoid this situation:

  • Always put risk management first. My number one rule is to cut profits quickly. 
  • No matter how hot you’re trading, stay humble or the market will find a way to humble you. 
  • You’re only as good as your last trade. Stay focused and trade with a plan. 
  • If you make a mistake, bail on the trade. Don’t try to add to a loser; be left hoping and praying. 

Of course, I could have made things worse for myself. Some traders will try to revenge trade and let their emotions get the best of them. After taking that loss, I dialed it down, which is the smart thing to do.

I also reviewed and scrutinized the trade.

Why?

Because I wanted to be reminded of what it felt like. You will likely repeat the same mistake if you run away from your problems or try to forget the trade.

Own your mistakes.

I overtraded, was too aggressive, and didn’t want to admit I was wrong immediately.

If I didn’t make this mistake in May, I’d probably be trading a lot bigger and with greater confidence.

It has taken me less than three months to recover my losses from that trade.

And while that might not sound like a long time, it’s been a great exercise in my patience.

How To Recover From A Bad Loss

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  • Analyze your strengths and weaknesses daily. The best way to do that is by journaling. You always want to be transparent and honest with yourself.
  • Size down. Forget about the revenge trade or doubling down. Slowly build your confidence up with one trade at a time.
  • Recognize that trading is a marathon, not a sprint.
  • Take time off or reduce the number of trades you take. Focus on your best setups only.
  • Embrace the process, not profits. I celebrate my students who make $10 on trades because it’s not about the money. It’s about learning those first few years. Build up your knowledge bank first before your brokerage account.

Get Better One Day At a Time

Millioniare Mentor Update Avoid the Slippery Slope
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Every single day my team and I are hosting live training sessions throughout the day. In these sessions, we discuss what stocks are moving, the opportunities we see, and the tools we use to take advantage of these plays.

We bring it to you at zero cost. 

Shame on you if you haven’t attended one of these free live training classes.

DISCOVER HOW ELITE TRADERS PLAY THIS GAME. 

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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”