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Trading Tips-Tim Sykes Penny Stock

#1 Account Killer

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Written by Timothy Sykes
Updated 8/9/2022 6 min read

Over the last two decades, I’ve taught thousands of folks how to trade the markets.

Some come to me with years of experience, while others are as fresh as a newborn baby.

But no matter who they are or where they come from, there is one mistake I see time and again…

A mistake that destroys a trading account faster than anything else…

Oversized trades.

Don’t assume that consistent profits or a string of wins make you immune.

Everyone needs to watch out for oversized trades, including myself.

Heck, just the other day, I screwed up when I traded FaZe Holdings Inc. (NASDAQ FAZE).

Good thing I cut my loss quickly.

The good news is that you don’t have to let this common mistake own you.

In fact, I’m going to show you a few ways to avoid oversized trades before you click the button.

Plus, I’ll explain how to identify and manage them when you’re already in a trade.

This will save you a ton of frustration and, more importantly, money.

Why Oversized Trades Kill

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Not all big trades fail. In fact, if you have a high enough win-rate, it may take weeks before you notice.

But when it happens, it becomes painfully obvious.

Every trade has a probability of success and failure.

On average, if I take enough trades using the same strategy, the results converge on the averages.

However, that doesn’t mean there can’t be a string of losers. And it’s that outside possibility we need to protect against.

Let me give you an example.

Imagine I started with a $5,000 account.

I risk 20% of the account to make double what I risk.

Assuming I win 75% of the time, that means I should make about 25% of my account per trade.

However, what happens if I lose 5x in a row?

That $5,000 account would drop down to $1,638.

The odds of that happening are 0.098%, but not zero.

Yet, a funny thing happens when you find yourself in a trade with too much at stake.

People panic and start to make bad decisions.

Consequently, while losing 5x in a row should statistically happen only 0.098% of the time, when you go ‘on-tilt’ as they say in poker, that percentage skyrockets.

Set Yourself Up For Success

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I tell my students there are markets for learning and markets for earning.

2021 was a market for earning. The first part of 2022 was a market for learning. Now, we’re into an earning market.

My size reflects the market conditions.

However, I have a process to scale up.

Stair Step Size

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Let’s assume I define my trades as a percentage of my account.

I start with a $5,000 account and a 5% trade size, or $250.

I am unlikely to increase that trade size until the account gets beyond $7,500.

From there, I would cautiously increase my size until it reaches 5% of $7,500 or $375.

If the account drops below $7,500, I revert back to $250.

This stairstep approach keeps me consistent in how I trade without worrying about whether I take the right size or not.

Set Daily and Weekly Limits

Some days I take one trade. Some days I take five.

It’s rare that I take any more.

Putting daily and weekly limits on the number of trades you take as well as maximum losses can keep you from going ‘on tilt.’

Plus, it avoids another common mistake, overtrading.

Cut Losses Quickly

When a trade is over, it’s over. Big losses don’t always start big. In fact, many can start with an appropriately sized trade that ignores stop losses.

I harp on cutting losses quickly simply because it’s the best method I know of to avoid massive drawdowns.

Review Your Trades

Every day, I go over my trades to make sure I executed the plan correctly.

That means correctly identifying setups, buying the right number of shares, and exiting at my target or stop loss.

The best place to keep this is in a trade journal.

Recognize and Handle Oversized Trades

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Taking oversized trades starts innocently enough. But it can quickly spiral out of control.

The good news is a few simple tricks can help you identify oversized trades.

Here is what to look out for:

  • Any trade that you feel the need to check on constantly and after hours. Trading is fun, but it shouldn’t consume your life.
  • Your losses exceed the maximum amount you allow on any given day.
  • The stock has gone beyond your stop loss.
  • Your typical trade size is hundreds of shares, and your current position is thousands.

Whenever I find myself in a trade with too much on the line, I have two options:

  1. Cut the size down to a manageable amount
  2. Exit the trade completely

Whatever you choose is up to you. But letting a trade ride once you know it was not executed correctly can lead to serious losses.

Every day, I work with traders to organize themselves, learn chart patterns, and execute cleaner trades.

It takes time and practice, but it works. Just look at my success stories.

I want you to become one of them. Take my millionaire challenge.


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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

* 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”