How To Deal With Risk Trading Penny Stocks - Timothy Sykes

How To Deal With Risk Trading Penny Stocks

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Risky business. No, I’m not talking about the Tom Cruise movie: I’m talking about trading. Simply put, trading is a risky business. But with risk comes reward, and that’s why you can potentially make so much money as a trader.

Download the key points of this post as PDF.

If you’re uncomfortable with risk, you’re not alone. However, to improve your trading, you’ll need to become more comfortable with risk, because it’s always going to be part of the process. Follow these 8 tips, and you’ll be well on your way to being more fearless and far less risk-averse in your trading.

1. Learn the basics. On the one hand, learning the basics of the stock market might not seem like it has a lot to do with risk management. But when you really think about it, establishing a knowledge base is at the core of becoming more comfortable with risk…start by reading this free stock trading guide and watch these free video lessons too.

Risk is inherent in trading. You cannot change this (sorry). Honestly, the best you can do is try your best to mitigate that risk, and the most effective way to do that is to increase your knowledge through intense preparation and study. Improving your knowledge of the rules of the market, observing past trends, and applying this information as you trade will make it far easier to take calculated risks.

Just like this great trading challenge student says over and over:

In the Tim Sykes Millionaire Challenge, I guide my students through the basics of trading and beyond, so that they can use all of the tools at their disposal to make smart investment decisions.

2. Do your homework. This is an extension of the previous tip, but nonetheless important to discuss. To become more comfortable with risk, it’s important to do your homework.

What do I mean by “do your homework”? I mean that as a trader, you always have to do everything that you possibly can to be prepared. Beyond learning the basics, this is something you will have to do for the rest of your trading life.

Before making a trade, do the necessary behind the scenes work. Research the companies, and identify markers of success or red flags.

Watch this other free stock trading guide on how to be properly prepared on each and every trade.

You probably wouldn’t even buy a pair of shoes without looking up online reviews, so why would you throw your money into an enterprise where you haven’t done your research? Make this a habit and you’ll improve your chances of making millions.

3. Surround yourself with success. Most successful traders have attained a certain level of comfort with risk. To a certain degree, surrounding yourself with successful traders like this can have a positive “rubbing off” effect.

When you immerse and surround yourself with people, subconsciously you begin to take on their attitudes and habits. This makes it especially important to surround yourself with aspirational, inspiring people. If you surround yourself with successful traders who are comfortable with risk, over time it will increase your comfort with risk, too.

I’m talking about great traders like this who make the trading challenge chatroom my favorite chatroom of all-time!

4. Consult with your mentor. I never had a mentor and that sucked so it took me SO much longer to learn basic rules…when you do get a mentor, ideally via my trading challenge since we have several millionaire traders now coaching others, understand that they are further along in their trading career than you. This means that they can be an invaluable source of advice and insight. This holds true for all aspects of trading, but particularly with risk.

Your mentor has had to contend with risk him or herself, and probably has some sage words of advice. When they speak up about how they increased their threshold for risk, listen up: there’s a lot of wisdom there that can help you avoid a lot of discomfort in your own career! Let your mentor be one of the secrets to your success.

5. Anticipate potential results. Considering potential outcomes of a trade can assist in making you more comfortable with risk. Before you pull the trigger, pause to think: what’s the best/worst that could happen? Is that outcome something I could live with?

If you’ve done your homework and are trading in a way that has delivered good results before, then you can feel more confident in taking a risk. However, if upon reflection of potential results you feel even less confident, it could be a sign that this isn’t a positive risk to take. Know the difference!

6. Do the right thing. Have you ever heard the phrase “sometimes the hard thing is also the right thing?”. This is very true in trading.

Ironically, the fear of risk can make people gloss over some details because they just “don’t want to know”. It’s easy to fall into the trap of taking shortcuts because things seem hard or intimidating. But ultimately this will make your trades more risky, because you won’t be coming from a place of preparedness and risk reduction.

I always urge the Tim Sykes Million Challenge team to be responsible in their trading, and do the things they know they should, even when they don’t feel like it. It makes them better traders.

7. Stop avoiding risk. Just do it. Or rather, don’t do it, when it comes to avoiding risk. Often, the thing we run away from the most seemingly crops up the most often. So why not come to a place of peace with risk rather than fighting or resisting it?

If you’re constantly stressed out about the very prospect of risk, it’s going to hold you back from seeing straight and from finding success. So stop fighting it! Embrace it…or at the very least, accept it.

8. Know that you will make mistakes. This tip works in tandem with the previous one. Basically, this is the reality check. Whether or not you avoid risk, love it or hate it, you need to know that it is part of the trading process. So is making mistakes. Even the best-laid plans sometimes don’t work out.

Don’t let this get you down. Rather, let it be freeing. Everyone will make a mistake (more than one) over their time as a trader. You included. Do the best you can, and try to recover quickly when it does happen, but know that it simply goes with the territory.

As unpleasant as it may be at times, risk and trading go hand in hand. While few ever truly love risk, it’s important to come to a place of accepting it. You’re not going to change that it exists, so rather than fighting it, work with it. It will improve your outlook, your optimism, your trading, and maybe even your life.

How comfortable are you with risk?

Posted in Basics

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64 comments

Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

  1. Anonymous

    I think this is one of the best blog posts you’ve written thus far. Good job Sykes!

    – Rockhound727 in chat

  2. Robin

    Today is day 1 in your chat room and on the challenge. I look forward to learning more and working my ass off to get better over the next year.

  3. Richard McBane

    Great article! I have to do better at getting comfortable with being uncomfortable, risk and losses are part of the game!

  4. Juan Carlos

    great lessons on risk…if you want to trade you have to be comfortable with risk and know that you will make mistakes sometimes. It is all part of the game, so that’s why managing your risk is very important.

  5. issac rivera

    great blog tim . so true about surrounding yourself with like minded people , love this one.. see you in the chatroom haha

  6. Michael Smithng

    Awesome! Personally, I think #7 rings slightly more true than the rest of these very valuable points here. One needs to stop avoiding risk, or at least come to terms with its fundamental presence, in this environment if forward momentum is to be observed.

  7. edson magossi

    thanks Tim, Thank you Joel, I feel honored to be part of the challenge !!!

  8. bankatronic

    I enjoyed reading this blog & found it pretty darn edifying esp in regards to #7 “Stop avoiding risk”.
    “Risk is inherent in trading.” This can be a tough concept for traders like myself esp when recent life circumstances have been brutal BUT
    thankfully the strong & solid of character DO persevere.

    I’ve been busy getting the OTHER risk out of my life these last 6-8 months or so-
    rearranging it so to speak-mitigating it.
    For instance: moving from the noisiest most bizarre unsafe condo that used to be quite the opposite in a subdude safe charming neighborhood in Brooklyn NYC to Austin Texas this summer 😀

    Some days, I just could not handle taking risk at ALL in regards to trading because with the special needs neighbour screaming until 2am every night, the 90 decibel jackhammers outside for hours everyday, the other neighbor’s cigarette smoke coming through the wall cracks somehow EVEN after renovations, the other neighbor’s 4 dogs barking non stop all day & friends with major drama that I had to just DROP
    LOL IT IS MADNESS.

    But it is also for a REASON.
    The trading gods are saying-make it so intolerable so that she’ll move & be in a safer state-then her trading can take off! :)))

    It is like the universal good vibe made things so crazy until it was just a no brainer to not only move out of the building but to a whole different part of the country!

    The overwhelming stress has been definitely keeping me from reaching my potential in trading & the move will be the catalyst that helps me to really take these lessons/dedication to the next level!

    In short-Get the superfluous stress out of life-every little thing-then embrace the risk like you & Dux explain. It is technical- like if a trend line breaks-there is no emotional anything that can put the trendline back-YOU JUST LOOK FOR THE NEXT TREND! :))

    Thanks, Tim, had to vent a tad. Life happens-WE ADAPT.

    I love every aspect of learning to trade well!

    YEAH!!!!!!

  9. bankatronic

    Thanks Tim It was an edifying blog & “#7. Stop avoiding risk” resonated

  10. Terry (Tib) Mcquade

    Thanks for the lessons. cant wait to put everything to use that you have taught me.

  11. Janet Deleskey

    I love how you take the time to reply to everyone on social media, be it here, Facebook and Instagram, it is nice that you are not only someone to look up to but you make the reach all so very real with your interaction with people. I know you have replied to me every time I have posted. I’m hanging in there till the day I can actually be a student of yours!
    Thanks Timothy for taking the time!
    Janet D AKAmikamouse

  12. OceanRider

    I need to manage risk better by doing a better job scaling into a position and building from there. I don’t do such a good job at that and I noticed that in TT from TG that TG is always scaling in and out as needed. I scale out and take profits easier than scaling in. Thank you for all of these points. They are all very applicable to everyone.

  13. LX888

    I love this blog post. I have always taken risk and love getting out of my comfort zone and especially, when I see impact on my life. Thank you, Guru Tim

  14. Eric

    Be comfortable being uncomfortable .. Nice 🙂 .. It’s hard to break free but once you do. You aren’t afraid of taking risks .,just follow the rules. And you will be safe safe safe .. Still so much to never, never stop. Learning, even when you think you know it you don’t … The market will teach you if you don’t listen to mentors. 😉

  15. Eric

    Be comfortable being uncomfortable .. Nice 🙂 .. It’s hard to break free but once you do. You aren’t afraid of taking risks .,just follow the rules. And you will be safe safe safe .. Still so much to learn never, never stop. Learning, even when you think you know it you don’t … The market will teach you if you don’t listen to mentors. 😉

  16. Abdou

    Thank you Tim. You hit the nail on the spot! I believe in the content of your blog post.It is a good reminder and principle every trader has to operate by in order to bring about the desired outcome of trading.Like you said,risk is part of life. As the adage old saying goes no risk no gain.

  17. Sue

    When doing a trade, understand that there is always risk involved. Be prepared for this, try to assume a comfort level and manage the risk.

  18. Bill

    Tim,
    Thanks for the 8 tips, I’m a new student just starting out and the energy in your successful students and the knowledge you so eagerly share makes me excited to begin my journey. Thanks

  19. Growth4me

    Thanks Tim, Educate yourself to be comfortable with the risk and how you work with it.

  20. Dwayne M

    Thanks again Tim! This article is on point. I am a planner and I also enjoy learning and research. Usually once I read up on something very interesting I want to attempt it. I have been studying your YouTube videos for about 2 months n read all the blogs on your page. RISK!! This has really paid off…about 75% of the 1st. 4 weeks of the MMP I have reviewed. Now I must set up a Brokerage Acct and step out there. I know I have To Set Rules for myself to follow. Tim, I am both excited about it all and a bit scared…in a good way. No I must learn to be comfortable with Risk in trading. The many video lessons have helped. Thank you for all the education!

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