We all have rules to live by. Do you follow yours to a T?
Even though we know rules are good for us … we like to break them. That can be fun, right? But in trading, it only leads to pain. Rules are what separates the consistent traders from the gunslingers.
Keep reading for more rules to live and trade by. First this from my travels…
Table of Contents
- 1 A Super Meetup
- 2 Rules to Live By: Live Life to Its Fullest
- 3 Trading Mentor: Trading Rules to Live By
- 3.1 “Tim, that loss would make me feel bad. You followed your rules and cut losses quickly. What’s the difference between a good loss and a bad loss?”
- 3.2 Ambow Education Holding Ltd. ADS (AMEX: AMBO)
- 3.3 Good Rules and Discipline
- 3.4 “2020 is now your most profitable year ever. Is it challenging to remove emotion and focus on one trade at a time? Are you thinking about passing $1 million this year?”
- 3.5 Be Grateful Every Day
- 3.6 Open Your Mind to Potential
- 4 Trading Mindset Lesson of the Week
- 5 Millionaire Mentor Market Wrap
A Super Meetup
My recent trip to Arizona was amazing. It turned into a super meetup of some very talented and hard-working traders.
I met with Paul Scolardi (dubbed the Superman of Stocks). Paul’s sharing some big news soon — and he’s SUPER excited about it. (Sorry, couldn’t resist.) I’ll keep you posted.
I also met with Jack Kellogg and Kyle Williams. We have exciting news about these awesome young traders coming soon. (Stay tuned … Jack might even get a new chain to wear outside his shirt.)
Roland Wolf was also there. Roland recently launched a new newsletter, “$1K Paydays.”
Finally, Matt Monaco was there, too. As you probably know, Matt helped me with the “30-Day Bootcamp.” We released it to rave reviews over the summer.
Matt also recently launched the Small Cap Rockets chat room with John Papa (papajohn on Profit.ly and @SublimeTrades on Twitter) and StocksToTrade lead trainer Tim Bohen.
After so many months cooped up due to the pandemic, it was great to get out. And it reminded me of one of the most important…
Rules to Live By: Live Life to Its Fullest
One of the most important rules to live by is to get out and live your life.
To be 100% clear … We all have a responsibility to do the right thing during the pandemic. So I’m NOT suggesting you break any rules about travel or the use of face masks.
This is a long-term life lesson…
Too many traders sit behind their screens all day, every day, for months on end. It blows my mind because the whole point of getting into trading is to free yourself from a 9-to-5. So build your knowledge base, gain experience, and work to become self-sufficient. Then go live your life.
Hiking in Arizona reminded me of how important it is to get out and experience this amazing planet.
I have a few more rules to live by in this post. Let’s start by reviewing a trade…
Trading Mentor: Trading Rules to Live By
Last week I had one of my biggest losses in a while. It was actually funny. My haters jumped on saying, “Sykes just blew up!” Please. I had a lousy 2,000 shares … So no, I didn’t even come close to blowing up. By the end of the day, they were embarrassed because I had an $11K swing to finish up $6,949 on the day.*
(*These trading results are not typical. Individual results will vary. Most traders lose money. My top students have the benefit of many years of hard work and dedication. Never risk more than you can afford to lose. Trading is inherently risky. Always do your due diligence. )
Here’s a rule to live by: losses happen, so learn to take them mechanically. After the loss, I got this question from a student…
“Tim, that loss would make me feel bad. You followed your rules and cut losses quickly. What’s the difference between a good loss and a bad loss?”
Rule #1 is to cut losses quickly. Breaking that rule would have benefitted me on this one trade. But breaking rules leads traders down a very slippery slope. Which is why I’m SO happy I followed my rules. It helped me turn my day around.
Let’s check out the trade…
Ambow Education Holding Ltd. ADS (AMEX: AMBO)
China-based Ambow Education Holdings is an educational service provider. It has an Amazon Web Services training deal with Amazon (NASDAQ: AMZN).
On September 28, AMBO spiked in premarket trading. The catalyst was news that the company is expanding its partnership with Amazon. It was already up a lot, and I don’t like to chase. So I took a very small position on the premarket dip. My goal was to sell in the $5s.
Take a look at the AMBO chart from September 28:
As you can see, the stock tanked right out of the gate. The thing is…
You have to accept that losses are part of the game. This is why I trade so cautiously. I was buying a stock already up roughly 150% on the day. So I knew it was a risky trade. That’s why the position size was so small. I still don’t know why it dropped. Crazy stuff — there was no news.
When it was dropping, my thought was “I don’t know what’s happening. Let me get out.”
Then it got halted. After the halt, it actually reopened above $5 and it went to a high of $6.43. So, barring the halt, it probably would’ve been a profitable trade. (I sometimes get asked about trading halt rules. Learn about trading halts here. And see current trading halts here.)
That day — and that trade — was a good example of…
Bouncing Back in the Stock Market
Good Rules and Discipline
I don’t look at my own trades and say, “Oh, personal trade, bad idea.” I got a little unlucky, but I stuck to my rules. I’m happy I cut losses quickly and mechanically.
This is a great example of why I share my rules. It’s why I show all my trades — including position sizes — transparently. Good rules and good discipline win the marathon.
Check out these…
6 SIMPLE Rules I Wish I’d Known When I First Started Trading
Here’s another question from a Trading Challenge student…
“2020 is now your most profitable year ever. Is it challenging to remove emotion and focus on one trade at a time? Are you thinking about passing $1 million this year?”
Is it challenging to remove emotion? Not at all. Again, this goes back to rules. I wasn’t even aware it was my most profitable year until one of my team members pointed it out.
Obviously, I know the million-dollar mark is within sight. After all, I’m human. But whether I end the year with $840K, $900K, or $600K … I’m grateful for everything.*
That’s the next rule to live by…
Be Grateful Every Day
Find a sense of gratitude every day. Even if you’re struggling right now, find something to be grateful for. If you can read this, you have access to the internet. I think the internet is the great leveler. You can learn almost anything on the internet — including skills that can change your life.
Remember, I’m also trading for charity these days. I’m more interested in showing the process. And in showing what works. I get more amped when a student makes $10K in a day. Especially the first time because it helps them to understand the potential.
That brings up another rule to live by…
Open Your Mind to Potential
When I was a freshman in college, my mind opened to the true potential of trading. One trade — that’s all it took. It was my first six-figure trade, and it completely blew me away.
You can read about it in my best-selling book “An American Hedge Fund.” Click the link to get it for free. Chapter 6: Once In a Lifetime (page 85) is fully dedicated to that trade. It changed my life. Again, not by how much I made but because it opened me up to potential.
Trading Mindset Lesson of the Week
I hope you’ve gathered some rules to live by. This week’s trading mindset lesson is another…
Take It One Trade at a Time
Take it one trade at a time and learn to take singles. I say this all the time. Also, don’t look to trade every day. It’s never my goal to take a trade. Whether I have a live trading webinar or not, my goal is to make good trades.
I know that’s not fun — it’s not an exciting mindset. But it’s what helped me take my tiny account at the start of 2020 and turn it into nearly $850,000.*
Here’s another of my rules to live by…
It’s a Marathon, Not a Sprint
Too many people want quick and fast. The problem with that is that most people who make a lot of money fast also lose it fast. Like lottery winners who lose everything and end up declaring bankruptcy.
Midnight motivation: there's NO obstacle too great that you can't overcome if you want it bad enough & if you're dedicated/patient enough to achieve your goals over time. Sadly, too many people think success happens overnight, but in reality the journey can take YEARS/DECADES!
The strategies I teach won’t help you get rich quick. The irony is that time is relative. How soon could you potentially get rich working that 9-to-5?
One final rule to live by…
Treat the Market Like a Business
Once you get free, you’ll be able to have fun with the money you make in the markets. But the fun is outside the markets. So treat trading and the market like a business. If you treat your business well enough and you’re disciplined, THEN you can have a lot more fun.
But if you want trading to be fun, you’re falling for one of the greatest traps in trading…
Gunslingers Have Fun (But Lose BIG)
Being a gunslinger is exciting. Swing for the fences, right? What happens if you’re wrong? What if I’d gone big on that AMBO trade? Instead of losing $4,240, it could have been 10 times that amount. Or more.
So, yeah, being a gunslinger is fun until you get crushed. If you want to do that, eventually you’re gonna lose big. You’ll probably blow up. You choose.
Millionaire Mentor Market Wrap
That’s it for this week. Be safe — the market is volatile right now. There’s still uncertainty with the pandemic. Also, you have to consider the upcoming election. And now President Trump and FLOTUS have tested positive for coronavirus.
Who knows what will happen in the stock market this week? I don’t like to guess — only react.
As you continue to study and trade, follow the rules. (I trade using these rules.) Once you start breaking rules, it’s difficult to regain discipline. Stick to the rules and work on the process.
Now go study…
What should you study? If you’re serious and dedicated, apply for the Trading Challenge today. It’s not easy. But I share everything I’ve learned in 20 years of trading and over a decade of teaching. Do you have what it takes? Apply today.
What do you think of the rules to live by in this post? Comment below, I love to hear from all my readers!
As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!
Which is why I've launched my Trading Challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.
So when you get a chance make sure you check it out.
PS: Don’t forget to check out my 30 Day Bootcamp, it will teach you everything you need to know about trading.