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Trading Tips-Tim Sykes Penny Stock

The #1 Way to Keep Money in Your Pocket

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Written by Timothy Sykes
Updated 6/16/2022 5 min read

One of the main reasons I’ve been able to succeed at trading for two decades now is that I’m very good at protecting my profits.

If I make money, it’s hard for you to snatch it back from me.

Now, I teach my students several ways to manage risk, the top being lose small and fast.

What I don’t often talk about is what to do when your account has grown substantially.

Take Mark Croock, one of my millionaire trading students.

Just the other day, when markets were plunging, Mark’s Evolved Trader strategy smacked a huge win…

mark croock profit substantiation

Do yourself a favor and check out Mark’s Evolved Trader Summit

I don’t know about you, but that’s a lot of money in one day, even by my standards.

Now, Mark could roll that into his account and up the size of his next trade.

But I’ve got a better way to manage account growth, one that not only protects profits but focuses on long-term wealth generation rather than quick wins.

And once you learn it, you’ll be able to sleep easier at night and break through common mental barriers.

Go Back to Square One

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Early on in my trading career, I struggled to get my account over certain dollar thresholds.

First it was $50,000, then $100,000, etc.

It turns out this is a common problem that traders face all the time.

This mental barrier prevents them from breaking through to the next level.

So, I came up with a simple solution…

Reset the account.

If I was comfortable with $30,000 in my account, I would take out profits at the end of the week or when it got to $50,000.

This does two things.

First, it locks in profits by moving them over to my bank account.

Second, it keeps my account at a value that I’m comfortable with trading.

Increase Slowly

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Now, this creates a problem when I want to increase the size of my trades.

At some point, if the size of trades gets too large relative to my account, it’ll start taking huge swings and create problems.

A lot of traders want to take their wins and roll them right into the next trade.

Instead, I prefer to do that slowly over time in a more controlled fashion.

One easy way to do that is to size the trade based on a percentage of your account.

Assume I choose to risk 1% of my $30,000 account. I can size the trade as 1% of the total account, which is $300.

Alternatively, I can size the trade based on a calculated loss of $300. To do that, I’d need to know my entry and stop-loss out of the gate, which isn’t always exact in my style of trading.

Now, let’s say that I continue to reset my account back to $30,000.

I could slowly increase the amount from 1% to 1.25% to 1.5% and so on.

The key is to make sure I do it in a methodical way that allows me to mentally adjust.

Similarly, I can slowly increase my account size on each reset or the amount I reset from.

For example, I may reset my account to $30,500 next time or wait until I hit $50,500.

Be Comfortable With Consistency

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One thing new folks fail to realize is that most career traders don’t keep growing their account into infinity for two reasons.

First, depending on the style of trading, they run into practical challenges where their position size would start to influence price.

That’s why I’m particular in the liquidity of the stocks that I trade, not that I trade any huge size.

Second is there simply isn’t a need after a certain point. Most traders find a groove where their gains are significant enough to make them happy.

I know traders that like to make $10,000 a day and others that are fine with $500. And they’ve been doing it for years.

Only you know what level is appropriate for you.

And as I’ve said before, this isn’t something that needs to happen overnight.

Nearly every one of my millionaire students took years to get where they are.

Trading is a business that takes time and investment.

Now, if you’re looking to cut the learning curve, then I recommend you check out Mark’s Evolved Trader.

Not only is he a fantastic trader but an incredible teacher as well.

Click here to learn more.

 

—Tim


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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

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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”