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Trading Psychology

Bouncing Back From A Seven Figure Loss

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Written by Timothy Sykes
Updated 11/23/2022 5 min read

Last summer Tim Lento got caught on the wrong side of AMTD Digital (HKD). If you recall, the stock went from $12 to $2555 in a few short weeks.

In all my years of trading, I’ve never seen a Supernova like it.

Like many traders, Tim saw the price action and thought it would be a layup short. After all, HKD was not moving on fundamentals or any worthy news.

And like most pumps, the stock eventually cools off and dumps. However, I don’t know many traders who can hold a short on a stock moving in $100 increments.

The market can stay irrational longer than you can stay solvent.

And while the loss hurt Tim, it didn’t wipe him out.

He shared his expensive lesson at the 2022 Trader and Investor Summit last month, and I’d like to share it with you now.

What Went Wrong

Style Drifting

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Tim primarily trades one set up extremely well. He shorts Chinese pump and dumps. He’s made millions from trading the strategy and considers it his bread-and-butter play.

However, HKD was not a pump and dump. It didn’t spike off BS news…this was something different.

Tim admits he had no business in that trade because it wasn’t an A+ setup.

Many traders will get seduced when they hear about others making money utilizing a different strategy.

It’s natural to get FOMO.

And it takes discipline to fight it.

If you want to make consistent profits in the stock market, you’ve got to stick to what you know works.

That was Tim’s first mistake in the HKD trade.

Don’t Trade When You’re Mind Isn’t On The Markets

Tim was gearing up to go on a trip. He had a vacation and good times on his mind.

Tim had no business getting into HKD because he was distracted.

Many traders will come into the session distracted. Maybe they’ve got family and relationship issues, are planning an event, are tired, or even hungover.

Trading is already difficult. You’re at a major disadvantage if you’re not completely focused. If you’re not feeling good or are distracted, it’s better to take the day off than to lose money.

Tim Got Lazy

The market has a funny way of humbling traders.

Success can sometimes breed bad habits. For example, traders will stop journaling because they think they’ve figured it all out. Or because they’re profitable, they don’t have to do the small things that got them there.

Even elite athletes warm up, drill and practice. That’s how they stay sharp year-round. And while trading isn’t physically challenging, it’s a game of mental chess.

Making good decisions, staying focused, and discipline requires practice. And Tim started to get lazy and stopped doing the little things that helped him become a millionaire trader.

The market will kick your ass once you start to get lazy.

Tim’s Comeback

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Many traders blame everything but themselves when things go wrong, but not Tim.

He knew what he did wrong. He got into the wrong trade, was distracted, and was lazy with his process.

Luckily, Tim saw it as an easy fix.

Here’s what he’s doing now:

Journaling and Recording All His Trades.

Tim uses a spreadsheet to record the ticker, dates, PnL, and thesis behind the trade. It keeps him disciplined because he knows that when he makes a trade, he has to put it into his spreadsheet.

In addition, he can clearly see what’s working and why.

Sticking To What Works

Tim is a master at shorting Chinese pump and dumps. He studies the underwriters and press releases like a detective. That’s his number #1 setup. And that’s what he will be focusing on…

Style drifting cost him an expensive lesson.

But if you can learn from Tim, it could save you a lot of heartache in the future.

Tim Lento is a regular in the Trading Challenge Chatroom, helping traders navigate their way through the markets.

If you’d like to discover the Millionaire Challenge and how 30 of my students have gone through the program to become millionaire traders, click here to learn more. 

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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”