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Trading Tips-Tim Sykes Penny Stock

The Silent Killer of Trading Success

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Written by Timothy Sykes
Updated 2/16/2023 6 min read

Do you ever catch yourself:

  • Focusing more on making money and growing your account balance than the actual setups you’re trading?
  • Turning a good trade into a bad one because it reversed and you never took profits?
  • Jumping into several trades because you’re desperate for a win?
  • Sizing up your positions because you feel unstoppable?
  • Getting irritated when you lose on a trade because you feel like you need to make money all the time?
  • Getting stopped out on a trade, then re-entering with double the size?
  • Constantly comparing your gains to other traders?
  • Ignoring your trading plan?

If you answered yes to one or more of these questions, you’ve dealt with the monster that’s killed more trader dreams than anything else…

Greed.

It pains me to hear stories about traders who build up their accounts by trading patiently with discipline … then lose it all because they got greedy on one or two plays.

Don’t let greed be the downfall of your trading dreams.

After 20+ years of trading, $7.4 million in trading profits, and mentoring 32 millionaire students … I’ve discovered five ways to avoid the trap of excessive greed.

The Power to Succeed: How to Conquer Greed in Trading

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Many of my millionaire students started with just a few thousand bucks.

Despite their massive success and overcoming the odds (90% of traders fail) … they weren’t obsessed with making money.

In fact, some of them struggled for months, even years, before they found success.

What kept them going wasn’t the results in their PnL…

They fell in love with the process, learning the patterns and setups, developing a trading plan, and identifying where their edge lies.

Good traders will make money in any market.

Bad traders can only make money in super-hot markets.

That’s why you’re seeing stories like this pop up a lot more frequently:

Source: Wall Street Journal

How can you develop your skills if you’re focused on only making money?

5 Ways to Go From Greed to Greatness

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  1. Establish a Trading Plan

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A well-defined trading plan can help you stick with your strategy rather than make impulsive and emotionally-driven decisions.

Your trading plan should include:

  • Your thesis on why you’re long or short
  • The amount of capital you’re willing to risk on the trade
  • Your entry level
  • And two exits (one for profit taking, and the other being a stop in case you’re wrong.)

1. Practice Discipline

Believe it or not, I struggle with discipline. If you put me in front of a computer all day, you’ll find me overtrading. Fortunately, I’m so busy traveling and working on my charitable efforts that I don’t have the time to be in front of a computer all day.

But if discipline is an issue for you, then set rules for yourself to help you stay disciplined. For example, if overtrading is your problem, set a rule that you will take 1-3 trades per day maximum. Once you reach your limit, you’re done trading for the day.

If risk management is your problem, set a hard rule on what you’re willing to lose per trade and the maximum you are willing to lose for the day. If you hit your limits, then close out the trade or stop trading if you reach your max daily loss limit.

2. Stop Comparing Yourself to Others

I love sharing stories about my students. It makes me feel proud. However, hearing about someone making tens of thousands of dollars in a single day or six figures in a week can make some traders feel small…

They start forgetting about the process and start focusing on making more money. They aren’t happy that they went from losing to break-even. They see themselves as a failure because they are not making as much as the next person.

Don’t compare your chapter one to someone else’s chapter seven. Stick to the process. I believe the results will follow if you do enough of the right things. But you can’t skip steps, so stop trying to be a $ 1,000-a-day trader if you are not a $200-a-day trader yet.

3. Learn to Take Profits

I tell my students to expect the worst from these companies. Penny stocks are awesome because they can have big moves relatively quickly. However, a lot of them move on pumps…

And if you’re trading listed stocks, the companies will use the pump as a chance to raise capital through a stock offering. A stock offering will dilute the shares and likely cause the stock to tank hard.

It’s better to take your profits and move to the next trade vs. holding onto a stock because you think it will be the next 1,000% winner.

4. Focus on Long-Term Goals

Greed can often lead to short-sighted decision-making. It’s important to focus on long-term goals, such as building wealth over time, rather than trying to make a quick profit.

This can help you make more rational decisions and avoid the temptation to chase profits at any cost.

Bottom Line

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Eliminating greed from trading is challenging but necessary for anyone wanting to take it to the next level. By applying these five tips, traders can reduce the impact greed has on their decision-making.

If you’ve been trying to chase money and haven’t found the success you’re looking for, I invite you to check this out        


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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

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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 (205) 851-0506 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”