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Trading Lessons

Can You Tell The Difference Between A Good And Bad Trade?

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Written by Timothy Sykes
Updated 10/10/2023 8 min read

Many traders misjudge their trades.

They automatically assume that if the trade makes money, it’s good…and if it doesn’t, it’s bad.

That’s a bigtime newbie mistake.

And one that can be catastrophic if you continue to think that way.

Today, I will walk you through two “good” trades I recently had…one made money, and the other didn’t.

If you want to take your trading to the next level, then pay attention…this is the mindset you’ll need to develop.

Before I Break Down These Two Trades

Before I tell you about my two trades from last week, I feel like it’s a good idea to tell you first about my thought process before entering a trade.

I use a system called P.R.E.P.A.R.E.

If you haven’t heard of it before, here’s how it works:

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

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In the trading world, 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 the 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.

Now that you’ve got a better idea of how I’m sizing up my trade candidates allow me to tell you about these two trades from last week.

You can check out the checklist here. 

The first was in the ticker symbol VTGN. 

A Good Loss In VTGN

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One thing I’m always trying to do is identify winning patterns. And that’s something that drew me into trading the ticker symbol VTGN last Thursday.


Because it was reported that billionaire and Wall Street Legend Stevie Cohen’s fund invested in the company.

From experience, I knew that his small-cap buys did well.

For example, I recall BNOX, CYBN, and PRAX all performing well on his stock purchases.

Whenever a big player shows a vote of confidence in a small-cap company, I call that a legitimizer.

The goal was to buy and sell the stock the next day because I got in after hours.

It is very much in line with my weekend strategy. 

Of course, Friday’s action in the market was wild after the jobs numbers. The market initially sold off hard following the report and then rallied after the first hour or so of trading.

Given the ugly market on Friday, I had no choice but to cut losses short.

I ended up losing $378 on this trade. 

Nonetheless, I felt like this trade made a lot of sense. I recognized a winning pattern, got in at a level that wasn’t chasing, and had a reasonable target.

It didn’t work out…but I still rated it as a good trade.

My Almost Weekend Winner In TTOO

Tim Sykes in a boat in Italy checking the stocks on his top penny stocks list
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My goal was to buy TTOO and hold it over the weekend.


Several reasons.

First, I loved the setup.

It was a first green day former runner.

If you don’t know what that means, click play on the video below:

Former runners can repeat from my experience.

And the first green day buy after a significant decline is a good level to get in from a risk vs. reward basis.

In addition, what really drove me to take the trade was that the stock had a catalyst.

All these combined made it a good setup for me.

I got in at around $.258.

The plan was to take into the weekend and get out on Monday. But I saw the stock take off in the after-hours, so I decided to take a 9.3% profit. 

Notice why I gave my reasons on why I felt both trades were good. None of them had to do with my PnL.

The best traders don’t think in terms of PnL. They think in terms of risk vs. reward.

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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”