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Trading Lessons

Lessons from Losing $27,000 On a Trade

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Written by Timothy Sykes
Updated 6/21/2023 6 min read

I don’t think you can analyze your big losses enough.

Why?

Because you put yourself in a dangerous position.

And if you play with fire enough, your account will get burned…and go up in flames.

That’s why I want to talk to you more about my trade in EFTR from last Friday– my worst trade in decades.

I made a series of avoidable mistakes you can learn from.

And the best part is it won’t cost you $27K as it did me.

Back To Square One?

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What is wrong with me?

I made six figures in profits last year in one of the hardest markets we’ve experienced in decades. The Dow, S&P 500, and Nasdaq all got destroyed.

I was really proud of my trading, even though I made over $1 million in 2020 and 2021.

But with the markets raging the way they’ve been…you’d think I’d be crushing it…but I’m not.

The worst part?

I would be okay if I didn’t make two bonehead trades this year…which have eaten almost all my gains in 2023.

First things first…

Slow down.

I know taking a big loss can make you feel sick inside. It’s how I felt last weekend.

And if you are competitive, you probably want to get that loss back as quickly as possible.

But that’s not how it works. 

Right now, I’m trying to clear my head. And get back to basics.

But on Friday, after that EFTR loss, I didn’t stop.

In fact, I took three more trades after that.

Talk about being on full-tilt, right?

Accept Full Responsibility

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I made many mistakes in EFTR.

Some of those mistakes were unfortunate.

For example, I was long a stock that announced a direct offering.

That’s just unlucky.

But if I rewind the tape…it should have never gotten to that stage.

To become a better trader, you must own your actions.

You can’t blame your broker, Jay Powell, or Ken Griffin for your losses.

Taking Ownership 

I got way too excited about the news in EFTR.

If you’ve followed me, you know that morning panic dip buys have been my best trades.

EFTR wasn’t one of those plays.

In fact, I was trying to play a breakout.

This is super risky, and it’s hard to manage risk when a stock is already up so much. It can have a sharp sell-off, bounce right back, and resume the uptrend.

That’s why I would rather be a buyer on weakness most of the time.

But I thought the news was just too good…and biotechs have been sizzling lately.

However, the mistakes I made were inexcusable…

Let’s run them down quickly:

  • I got in during the pre-market. There’s nothing wrong with trading pre-market or even after hours. But you must also understand that it’s much more volatile than regular trading hours. That’s because volume tends to be lighter, and spreads tend to be wider. In addition, there are no volatility halts. That means stocks can go on wild rides without them being halted.

 

  • It’s very hard to play breakouts in the pre-market. You don’t know how a stock will open up. It didn’t matter because the company announced a stock offering while I was in the trade, so I never got a chance to see how it opened.

 

  • Trying to buy what I thought was the breakout quickly, I fat-fingered the trade, and instead of buying 8,000 shares, I bought 80,000 shares. Knowing I made a mistake, I should have exited the trade. Or at least sell 72K shares to reach my desired entry level. But the stock was selling off, and I didn’t want to start my Friday with a loss.

 

  • The stock kept selling off. This didn’t make much sense considering how bullish the news was. Plus, two Wall Street firms came out and gave it a high price target, I think it was $7.

 

  • But I made a massive blunder. Not only was I adding to the position, getting to the point of 181,000 shares…I was so dialed in…I totally forgot to look at my news feed. Had I been paying attention to it, I would have seen the headline on the $7.5 million direct offering.

 

  • I traded too big…too aggressively…and it wasn’t even my best setup.

What can I say…I did A LOT of DUMB stuff.

This loss is a stain I’ll wear for a few weeks, possibly even months.

But I’ll be fine.

Honestly, I’m glad this happened to me and not to one of my students. 

Final Note

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Let my $27,000 misfortune be a cautionary tale for all of you. Learn from this massive blunder I paid a heavy price to bring you.

Trading is a marathon, not a sprint. You’ll have setbacks along the way.

Will you learn from your mistakes like I plan to do…or will you self-sabotage like most people who try to trade?

I’ve helped over 30 of my students on their journey to becoming millionaire traders…if you think you should be next…

Click here to see if you’re a fit


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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

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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”