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How My Worst Trade in Years Nearly Wiped Out All My 2023 Gains

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Written by Timothy Sykes
Updated 5/26/2023 5 min read

I feel like such a jerk.

Here I am making fun of short sellers for not understanding risk vs. reward and risk management…

Then I go on to have one of my WORST trades in years.

A loss so big…

It has nearly wiped out all of my 2023 gains.

All because I made two mistakes that could have easily been avoided.

And if I can make these mistakes after +20 years…I know it can happen to anyone.

But you don’t need to take a five-figure loss like I did to learn from it.

I’ll show you how I messed up and how it can be avoided.

How It All Went Down

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Effector Therapeutics (EFTR) reported positive data updates from Phase 2 expansion cohorts evaluating Zotafin in patients with ER+ metastatic breast cancer at the 2023 Annual Meeting last Thursday.

The stock was raging in the pre-market on Friday, and it even received some high upgrades from Stifel and Mizuho, with price targets of $7.

Those are respectable firms and not some sleazy promoters.

Shares went from $0.46 on Thursday to a high of $1.27 in the pre-market on Friday.

However, when I saw the stock sell-off from its lows, I decided to buy some shares…

So that’s what I did…I was in at an average price of $1.10.

That’s a terrible entry, by the way. I’ve had my most success in panic dip buying…but buying a stock at $0.17 off its highs after it is up 100% is not exactly a panic dip buy, in my opinion.

So that’s mess up number one.

But that’s not what would cause me to have such a massive loss.

Usually, when a trade isn’t working in my favor, I will cut losses quickly.

But here is when things went bad for me….

I wanted to buy 8,000 shares of EFTR…

But instead, I “fat-fingered” and got filled on 80,000 shares.

A wise trader would have immediately gotten out of the position realizing their mistake.

And almost every time I am that wise trader. 

But instead of starting off the day with a loser…I wanted to see if I could finesse myself out of this trade.

And as the position was moving against me…I was averaging down.

I ended up having 189,100 shares at one point!

When It Rains, It Pours

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Unaware…the company announced a $7.5 million direct offering before the bell.

So here I am, trying to buy stock. Meanwhile, it’s selling off because they announced an offering.

I managed this massive position pretty well…I got out of the trade at $0.956.

However, with so much size on it…it resulted in a $27,202 loss.

Source: Profit.ly

Takeaways From This Loss

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  • You’re one trade away from being humbled. I was on my way to coming back from my first losing month in years. And now I could be looking at two consecutive losing months just because I was too loose one trade.
  • If I make a mistake, bail the trade. I tried to finesse this trade once I realized I bought more shares than I wanted.
  • Pay Attention. I trade super volatile stocks. And I need to focus on my trades when I’m in them. Being slow to realize the stock offering and not reacting quickly enough is inexcusable.
  • I’m still profitable on the year…but barely. Whenever you take a big hit, you naturally want to get it back immediately. However, that can lead to bigger losses. That’s why I will try to focus on one trade at a time and rack up small wins.

Taking big losses is something every trader must deal with at some point in their journey.

And while it’s never fun, you must use it as a learning lesson, or you’re bound to repeat your mistakes.

I’m not going anywhere.

I’ll bounce from this loss like I’ve bounced back from the rest. And it will start with getting back to the basics.

If you need a refresher on the basics (and we all do from time to time), then you’ll want to check this out  

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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 (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”