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Trading Psychology

Should You Make This Trade?

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Written by Timothy Sykes
Updated 6/29/2023 6 min read

I’m far from being the perfect trader.

But I’m living proof that you don’t have to be perfect to make millions in the stock market.

If you can cut losses quickly and take A+ setups…you have a better chance of making it, in my opinion.

It’s what’s helped me stay profitable for +20 years…

My win rate is so much higher than most traders because I put my ideas through a rigorous process.

I use a ranking system to look at each opportunity objectively. You won’t see me trade it if it doesn’t meet my standards.

What is this ranking system all about…and how can you start implementing it to help you make better trading decisions?

Should You Place This Trade?

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The best traders question everything.

Being curious is one of the best attributes to have as a trader.

So when people ask me how I can find winning trades consistently…

I tell them about my checklist.

It helps me decide on whether or not to take a trade.

To better explain my process, I’ll walk you through it with a long idea I looked at in BDTX the other day.

P. R. E. P. A. R. E

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The word PREPARE is an acronym I use to remember the elements of my checklist easily.

For example, the first P stands for Pattern/Price. 

Here I’m looking at the current price of the stock, checking out where I can find areas of support and resistance, and looking at it on multiple time frames.

When I looked at BDTX, it was trading at around $5.15.

The pattern that I want to see is a panic sell-off at or around the open.

I’m also looking at the price, which is one I really don’t like, and I’ll explain why shortly.

I use a scale of 1-to-20.

And at the time I was looking at it, I gave it a score of 10.

Next, we move on to the R…

This stands for Risk/Reward.

I’m looking at where my downside is compared to my upside.

On the chart, it looks like the $5.40 level is resistance. On the downside, it gets tricky.

At $5.15, I’m betting there are many longs with stops set at $5.

This means if stops get triggered, the stock can drop substantially lower.

I am not crazy about the risk vs. reward here because we are looking at potentially $0.25 of upside…while the downside is probably $0.35 if stops get triggered.

Ideally, I want trades that offer me a risk vs. reward of 3 to 1 or higher.

On a scale of 1-to-20…I rate the risk vs. reward a 7.

Next, we move on to the E in the formula. The E stands for Ease of entry. Is the stock thin? Is there enough volume, will I be able to get out cleanly or not…

These are all things I’m looking at.

By watching the price action, I understood this wouldn’t be a hard trade. And that’s why on a scale of 1-to-10, I rated it an 8.

Moving along…we look at the second P, which stands for Past Performance/History of Spking. 

This is graded on a 1-to-10 scale.

Based on the chart, BDTX has no history of going Supernova. 

And because of that, I rated it a 5.

Moving to A, which stands for At what time is it? / Personal Schedule. 

I was looking at BDTX in the pre-market. And I don’t really like trading pre-market. Ideally, I would have liked to see the stock go below $5, trigger a series of stop losses, and give me an entry near the $4.70 – $4.80 range.

Sometimes I will like a setup, but I might not take it if I’m about to travel or feel sleep-deprived.

In the case of BDTX, I rated this a 5.

Next, we are looking at the second R, Reason/Catalyst. 

BDTX did have strong phase 1 cancer news. While phase 1 is far from getting approved, it was bullish nonetheless.

On a scale of 1-to-10…I rated the catalyst a 7.

Now, what I’m about to share with you is something a lot of newbies overlook.

Sometimes they get so caught up in the price action and the catalyst…they fail to look at the rest of the market.

Not me.

If the overall market is crappy, there’s a good chance it will impact how your play will perform.

That’s why the last letter in the acronym is E, which stands for market environment. 

Stocks are absolutely raging at the moment. And from a scale of 1-to-10, I rate this environment a 10.

After going through this, I tally up the score.

Ideally, I want a score of 70 or above to be interested in the play.

BDTX at $5.15 gave me a score of 52…which just wasnt good enough.

At, $4.70 it does a little better with a 65 rating…but still not enough.

If you want to play around with the Trader Checklist Calculator, CLICK HERE TO GAIN ACCESS. It’s 100% free to use.

How You Doin’?

kyle mari and jack
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Can you believe it…the first half of 2023 is in the books.

If you’re not where you want to be with your trading, I can help.

You could be just one click away from leveling up. 

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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”