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Trading Lessons

Are You Spotting The Holes In Your Trading?

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Written by Timothy Sykes
Updated 5/17/2023 4 min read

There’s nowhere to run….

Nowhere to hide.

If you’ve got holes in your trading game, it’s just a matter of time until you’re exposed.

It’s our job to spot these holes and button them up if we want to be consistently profitable.

And while I’m trading better than last month, I still need to fix some stuff.

You may be dealing with the same issues or something else. Either way, I want to show you how I work through them, and hopefully, you can learn something from it.

The Good, The Bad, and The Ugly of Dip Buying

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If you’ve been reading the blog, you know I’ve been favoring morning panic dip buys as one of my top strategies to trade.

But I need to be careful….

It’s like the saying: if all you have is a hammer, everything looks like a nail. 

If I’m just looking for panic dip buys…then eventually, all sell-offs will look like dip buys.

And that’s sort of what happened to me on Wednesday.

Source: StocksToTrade

SMFL had a nice pop-off a PR stating it reached a deal with CloudKitchens for rapid local delivery of high-protein ice cream.

Not exactly a blockbuster headline…but the price action was strong. The stock hit a high of $5.07 in the morning, and I was waiting for a dip-buying opportunity to get in.

I got in at $3.60 and was looking for a quick scalp…which I got.

I exited at $3.72.

The stock pretty much traded downward after I closed it out.

I was happy with how I played this and happy I didn’t get greedy.

In fact, there was a lot of good for me to take back from this trade.

For example, focusing on risk and looking for entries that give me a chance to make money.

However, I also need to be careful.

Because a couple of hours after that trade, I made a boneheaded play in the ticker symbol XELA.

Source: StocksToTrade

XELA has been on a tear lately, going from $2.62 on Monday to a high of $8.85 on Wednesday.

But for whatever reason, I was not thinking about that when I decided to trade it.

In fact, I traded this in the afternoon. Normally, I like to take these plays in the morning.

So my timing was off.

But that’s not all.

I was also over-aggressive.

My entry was $7.12, not far from the highs. Not to mention, still significantly higher than the $2.62 it was trading at earlier in the week.

What does this mean in terms of the big picture?

Well, it means my timing has to be excellent.

And if it weren’t, I would be out of the trade for a fast loss.

The stock dropped below $7, and I bailed at $6.89.

What sucks is that the loss was double what I made on SMFL.

But there’s more.

The stock eventually did rally, but because my entry was poor, it would have been impossible to risk managing the trade responsibly.

That’s why waiting for a more meaningful panic is critical to executing the strategy.

Comparing The Two Trades

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  • SMFL was really the first-day mover… XELA has been a multi-day runner.
  • SMFL is running on a PR…XELA is running on a short squeeze.
  • The SMFL trade was earlier in the morning.

Bottom Line

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Whenever I make a trading mistake, I want to dissect it and figure out what I’m doing wrong.

Mistakes cost money. So I want to fix them right away. In addition, I want to see what I’m doing correctly and figure out ways to replicate it.

If you’d like to learn more about my game-changing trading program, watch this

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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”