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Trading Psychology

Your HW Assignment For The Day (Miami Edition)

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Written by Timothy Sykes
Updated 10/19/2022 4 min read

Getting Over The Hump

The worst thing you can do as a trader is to forget about your losses. Some people will drink to forget, beat themselves up emotionally, and take it out on others after suffering a big loss.

But the truth is, losing is your friend.

I know that sounds crazy, so allow me to explain.

Every trade you exit, win or loss, should be a learning lesson. However,  I believe your losses will teach you more about who you are as a trader and where you want to go.

Why?

A loss will often point out what you’re doing wrong.

For example:

  • Did you size into the trade incorrectly?
  • Did you follow your trading rules?
  • Was your thesis wrong?
  • Were you in the right mindset?
  • Was it one of your A+ setups, or did you style drift?
  • Is it a trend or setup currently working in the market?
  • What was your confidence level?
  • Did something scare you out of the trade?
  • Were you too greedy?
  • Were you too stubborn about taking a loss?
  • Were you impatient about the trade?

By analyzing your losses, you force yourself to answer these questions. In turn, you’re discovering your flaws.

The easiest way to becoming a break-even trader isn’t learning a new strategy. It’s actually figuring out what you are doing wrong and eliminating it.

Many of my millionaire students were not successful their first couple of years, and if you saw their results, you wouldn’t have thought they’d become millionaires.

But what makes them different from the others who fail is that they studied their losses and eventually stopped making the same mistakes.

Jack Schwarze, one of my millionaire students, consistently lost his first three years. He’s now meticulous when it comes to explaining the what and the why behind his trades.

Kyle Williams, another one of my millionaire students, records all his trades, and can tell you what his win-rate is and risk vs. reward ratio is.

Tim Lento is not shy to tell people he only trades two patterns well. When takes a big hit on a trade, it’s usually because he traded something out of his wheelhouse.

That’s why it’s critical you don’t run away from your losses. They will teach you more about yourself than any win will.

I can’t stress it enough. 

The HW Assignment I Gave To Conference Attendees

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At the end of the first day of the conference, I gave each attendee a homework assignment. I want to share it with you if you didn’t get a chance to make it to Miami.

Here it is:

Write down three of your strengths and three weaknesses as a trader. 

If you want to join the ranks and be my next millionaire student, you have to know what you’re good at and where you’re struggling. First, eliminate all the garbage that isn’t serving you. Then focus on your strengths.

Have a set of questions like the ones I mentioned above to help you analyze your trades. And become an honest critic of your trades. Stop thinking about trades as good vs. bad based on whether you made money or lost on them. Start asking deeper questions and strive to find the answers.

You want to analyze your stock plays like how some people analyze fantasy football. Become a stats junkie. The best traders know their setups and when they should push it. You can only do that once you have the stats to back it up.

Bonus HW Assignment

© Millionaire Media, LLC

I also gave attendees a bonus homework assignment, which I’ll also share with you here.

Write Down One Big Goal. 

Studies show if you have a goal you’re more likely to stay committed to it. In addition, you’ll be more productive and accomplish more. The key is to give yourself a BIG enough goal to shoot for.

You’ll have naysayers and haters along the way. But as long as you have tunnel vision, nothing can stop you.

Lastly, stay patient. Everyone is running their own race. Don’t get discouraged and stay positive. You’ll be surprised at how quickly you’ll be able to scale up once you’ve lasered in on your strengths and weaknesses.


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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

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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”