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Trading Psychology

3 Ways Towards Disciplined Trading

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Written by Timothy Sykes
Updated 6/23/2023 6 min read

Make no mistake about it…

You need to know a few setups that work.

I teach several, like the Weekend Trade and how I trade Supernovas.

If you dedicate yourself to studying the patterns, I don’t think they’re that hard to learn.

In fact, learning the strategies is probably one of the easiest things to do if you have a good mentor. 

What trips folks up…and what really stops them from achieving what my top students have…is the mental game of trading.

Specifically, discipline.

Or should I say the lack of discipline?

Very few things are as frustrating as having a series of winning trades and strong results get wiped out by one careless decision.

If you’re constantly giving up days, weeks, or even months’ worth of gains from bad trade selection or poor risk management, then today’s message is for you.

Because I’m about to share with you the 3 ways I’ve managed to stay disciplined for over two decades… while racking up $7.4 million in trading profits and mentoring over 30 millionaire students.

 

No. #1 Embrace Fear

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I am not one of those mentors who will tell you to block out fear and trade emotionless.

If you have no emotions, you’re likely dead, a psycho, or a short-seller.

For me, fear allows me to respect the market.

It helps me stay sharp and on my toes.

Most stocks I trade are crappy companies that won’t amount to anything. They’re also super volatile and can free-fall or skyrocket in a matter of seconds.

That’s why I need to be hyper-alert.

If I’m not, I’m vulnerable to big losses just like anyone else. 

That’s why I embrace fear.

And it’s how fear helps me craft my number one rule for trading:

CUT LOSSES QUICKLY

You see, I’ve made it part of my identity.

As long as I can keep my losses small…I’ll be able to work through whatever issues I have and eventually come out on top.

If you want to become more disciplined in your trading, you must develop strict risk management rules.

Mine is Cut Losses Quickly. 

 

No. #2  Thorough Trade Planning

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Before I enter a trade, I’m surveying the landscape.

I’m the type of trader who might see a stock for the first time, watch it for a few days, and then trade it afterward.

I do my best trading when I’m patient.

How can you improve your patience?

I think the best way to do it is to outline your best setups.

For example, I may like a specific catalyst but not like the price action in the stock.

Or I might like the catalyst, but I feel like I missed the initial move-up, so I’d only play if the stock dips back down.

So there are specific setups I’m looking for and then potential moves I’m playing for.

For example, I may buy stock off a panic dip buy to capture a quick 15-20% move.

But what happens if I get in and the stock doesn’t move?

If the play doesn’t work for me…I’m out.

I’m not always waiting for the position to go red on me.

You see if there’s a move I’m playing for and it’s not happening…I’m probably getting out fairly quickly.

While I do miss out on some monster moves…my tight rules keep me out of trouble for the most part.

I believe you can grow your account substantially if you stack small wins and manage risk properly.

That’s what I teach my students.

More Breaking News

 

No. #3 On-Going Self-Evaluation

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Unlike your favorite social-media trader, I prefer to post my trades…ALL OF THEM.

You can see them right here. 

When I win, you see it…

When I get my butt kicked…you see it.

But I’ve been under the microscope since my 20s.

There are tons of people who want to see me fail…but I know I will be hard to beat if I study, evaluate, and review my trades.

If I’m telling you to do these things and I’m not doing them…what kind of a mentor am I?

A lot of the time, I’ll even make video reviews breaking down my trades and explaining what I did right and wrong.

If I’m overtrading or being sloppy with my risk, it will come out when I do my reviews.

If I’m making money with a particular strategy, the review will reinforce what’s working.

Final Note

Discipline in trading, just like in life, isn’t easy.

However, I’ve discovered that you can succeed better if you follow the rules like the three I shared with you today.

They are essential for your long-term success.

If you need help being accountable… you should check out what my program offers. For some, it has been life-changing.

 


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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

* 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”