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Trading Lessons

Dodging Devastation: Avoid This Common Newbie Trading Mistake

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Written by Timothy Sykes
Updated 7/26/2023 4 min read

I haven’t exactly had the best year of trading in 2023.

But there’s been a few bright spots…

Specifically, my weekend trade

And last Friday was no different…

I stared at what I believed was a beautiful setup that checked all the boxes…

  • Low Risk
  • Massive Upside Potential
  • Strong Catalyst

However, what happened on Monday surprised even me.

It’s a valuable lesson…and one in which so many newbie traders make a mistake.

But I won’t let it happen to you.

The Weekend Trade

Lionel Messi is among the most popular athletes globally, with hundreds of millions of followers across social media.

And with his MLS debut last Friday, there was a solid chance I could see the ticker symbol MGOL pop on Monday.

MGOL has a licensing agreement allowing them to sell Messi-branded merchandise.

Of course, I realized everyone was buying his Miami jersey, which Adidas makes…but I figured there would be some good weekend press, and we’d see MGOL shoot up.

Not only was his MLS debut better than anyone could have expected…he managed to score the game-winning goal.

I bought shares on Friday at $2.27…

Early Monday morning, it was trading in the $2.40s in the pre-market. I could have taken profits then, but I didn’t see much risk in the stock, so I decided to wait for the market open to see if it would do anything.

Guess what happened?

The stock did absolutely nothing…

And that’s why I decided to get out near my break-even price.

Shortly after, it started to sell off, dropping into the $1.90s.

Here’s The Lesson

Millionaire trader and trading mentor Tim Sykes on stage
© Millionaire Media, LLC

So many traders fall in love with ideas and stock symbols…

  • The market is gonna crash
  • This stock is going to be the next GME
  • The mother of all short squeezes
  • So-and-So owns a lot of this stock
  • According to this short report, the stock is a zero

They get all these ideas in their head…

And let them dictate how they’ll manage the trade.

But that’s not how successful traders approach the market…

That’s not how my millionaire students are taught. 

You see, as much as I liked the MGOL idea…

I knew I could be wrong.

And I know better not to fight the tape.

Stop Trying To Hold And Hope

© Millionaire Media, LLC

My number one rule is to cut losses quickly.

If a stock isn’t doing what I think it will…I GET OUT.

My opinion doesn’t matter…price is king.

I see too many stubborn newbies.

Refusing to take a loss…

…Refusing to believe they’re wrong.

I teach my students that small wins add up over time. 

But I guess social media has so many traders jaded…

They see all these fugazi traders online, posting these monster winners (never showing their losses), and they have newbies believing it’s the only way to win in this market.

That’s simply not true.

I’m very proud that I trade like a coward.

I know what this market can do to you if you get too cocky and let your ego dominate your decision-making.

Stop thinking that one trade is going to make you rich.

Believe me, I’ve been doing this for +20 years and have made millions.

The way you win is by taking it one trade at a time.

Focus on the best setups, and if you lose, lose small.

Got Plays?

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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”