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Trading Lessons

How to Protect Your Gains: Best Patterns Working Now

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Written by Timothy Sykes
Updated 4/18/2022 5 min read

If you’re not profiting from the volatile moves we’re seeing in the market…

Then I’m sorry … you’re doing something wrong.

It’s gonna sound crazy, but you’re probably taking losses the wrong way.

In the stock market, there’s a right and a wrong way to lose.

I’ve spent over two decades perfecting my strategy to protect gains. I’ve even managed to teach my students to do the same. And now 20+ are millionaires.

So what do I mean about learning how to lose the right way?

Allow me to explain by showing you a recent trade where I lost $500…

And I’ll share the three lessons you can take from it so you can improve your trading. 

My Favorite Setup

high frequency trading
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Before I get into the trade, you need to understand the profit potential here.

Day traders rely on patterns to profit off of volatility. And the panic dip buy pattern is my favorite.

The idea is to find a stock trading high volume that’s way off its highs. I wait until the price is down 20% or more. The bigger the fall, the bigger the bounce.

After a huge sell-off, the price bottoms out and rebounds. That’s where I take profits. My goal is to buy at the bottom and ride the momentum back up.

It works in hot markets and slow ones. That’s not to say it works every time. This isn’t an exact science. But that’s why you must know how to take losses.

Study up more on this pattern here.

Check out this chart of Dr. Foods Inc. (OTCPK: DRFS). It fell for 15 minutes, put in a low, and bounced all the way back to the open. A 140% bounce!

DRFS chart: 1-day, 1-minute candles (Source: StocksToTrade)

But things don’t always work out like this. Sometimes the pattern fails, and you’ve gotta cut the loss before it drains your account.

Here’s how to protect your gains while hunting for profits, but first…

My Loss on AMTD

I show my losses for two reasons …

  • I want you to learn from them.
  • I’m not ashamed to tell the truth. It’s good to be real in an industry of fakes.

So many sketchy gurus talk about all the money they’ve made. But do you ever hear them talk about a loss? Do they show you a trade confirmation?

I don’t have to hide my losses because I’m the real deal.

On Thursday, February 24, 2022, I saw AMTD International Inc. American Depositary Shares (NYSE: AMTD) fall 50%. That’s a big dip off its highs. Especially since it ran the day before from $4 to the $7s …

AMTD chart: 2-days, 1-minute candles (Source: StocksToTrade)

I bought in after a huge dip at $3.85 and sold it when $4 resistance pushed the price back down.

Here’s a close-up of the chart …

AMTD chart: 1-day, 1-minute candles (Source: StocksToTrade)

Turns out I was right. The bounce was non-existent.

These are three lessons you can learn from this trade…

  • Focus on the best plays and get out if there’s weakness. Anything can happen in this market. Sometimes the best strategies fail. Cut the loss and pat yourself on the back for good discipline.
  • Don’t revenge trade. Losing is part of trading. Don’t let your emotions push you into bad plays for YOLO cash. That’s how traders blow up accounts.
  • A failed trade isn’t always a bad trade. Sure, I lost money on this one. But I played the pattern well. Especially since there wasn’t a bounce to profit from.

To consistently profit in the stock market you have to be an expert at winning AND losing.

I’ve been teaching my students how to do just that for over a decade now. It takes a lot of hard work, but as I always say, it’s not rocket science.

Want to plot out your trip to the moon?

Apply to learn today!

There’s no time like the present.

Comment below that you promise to always cut losses quickly! Also, what’s your biggest loss to date? And why didn’t you cut it earlier?

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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

* 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”