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Trading Recap

3 Fatal Flaws From My Tesla Trade

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Written by Timothy Sykes
Updated 12/30/2022 6 min read

It’s fun to catch a stock near the bottom.

You get to brag about picking it off within pennies of the low, and it can pay off big time.

It’s also a great way to lose money.

I lost over $3,000 trying to pinpoint a turnaround in Tesla (NASDAQ: TSLA)

Now, I know what you’re thinking…

Tim, you talk about buying panic dips all the time. What gives?

One word – discipline.

My morning panic dip buys follow my 7-Step Penny Stock Framework.

This trade did not.

I mistook a short squeeze for the beginning of a new trend.

Funny enough, this isn’t the first time this has happened to me.

In fact, my top six losses in 2022 all followed these same blunders.

That’s fine. We all make mistakes.

But I made it worse by averaging down until I had a massive position of 1,000 shares!

Promoters on Twitter only show you their wins.

However, losses can teach us just as much, if not more.

And this one has three great lessons that can help you avoid huge drawdowns and win more trades.

1. Know Thy Setups

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I could have won big on that Tesla trade and it still wouldn’t change the obvious…

My setup was awful.

Do I pick off my share of stock bottoms? Absolutely.

But I do it in a methodical way that follows my 7-Step Penny Stock Framework and uses extensively tested setups.

For example, this YouTube video covers a simple pattern I call the 1st Green Day that I teach my students for OTC plays.

No one is saying you shouldn’t explore new ideas.

However, there’s a right way and a wrong way to do it.

Many traders let their excitement push them into questionable setups with huge positions, ultimately creating massive losses.

I know how hard it is to listen to the news, read message boards, and see everyone under the sun talk about ONE stock.

You need to put all that out of your mind and focus on what’s in front of you.

If you don’t have a setup, you’re guessing.

Before every trade, ask yourself whether you’re following a battle-tested strategy or simply following the crowd.

2. Averaging Down vs. Doubling Down

Tim Sykes giving top tested trading tip from Venice, Italy 2021
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There was a great scene in Glass Onion: A Knives Out Mystery where Benoit Blanc, played by Daniel Craig, says to Birdie, played by Kate Hudson:

“It’s a dangerous thing to mistake speaking without thought for speaking the truth.”

Traders confuse averaging down with doubling down.

Averaging down follows a deliberate structure that adds to a position at key intervals while managing to a specific risk.

Doubling down adds to a position in the hope you can recover from your current losses.

Averaging down is controlled and planned.

Doubling down is undisciplined and reckless.

I can’t tell you how often traders tell me their worst losses happen when they add to a losing trade.

If you run into this problem, I have a simple solution – pick one entry and size.

3. Acknowledge Your Weakness

why i buy breakouts
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I titled the review video for my Challenge students The Ghosts of Christmas Past.

You see, long ago, I was a very undisciplined trader.

What you see now isn’t where I started.

Becoming a mentor to Millionaire Challenge students forced me to open up my trading.

I had to lay them all out there for everyone to see.

And let me tell you, it’s pretty embarrassing to write about your mistakes.

So yeah, shame played a part in it.

But, writing down my trades helped me to acknowledge my strengths and weaknesses.

I journal every one of my trades on Profitly.

There is no single tool that will improve a trader’s performance faster than a journal.

You can’t improve your skills if you don’t know where to start.

I realized early on that I didn’t do well with large accounts.

That’s why I reset my balance to $100,000 every year.

I didn’t realize until I made the video about the Tesla trade that my six largest losses in 2022 all followed the same pattern,

Our weaknesses are a part of who we are.

You can’t start to deal with them until you acknowledge them.

Once you do, then you can decide whether you want to put a plan together that works through them or around them.

And Remember…

Bad habits never truly disappear.

They’re always lurking in the background.

Don’t get down on yourself for repeating a mistake you made in the past.

Accept it. Learn from it. And work to reduce its influence.


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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”