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Three Trading Adjustments To Get Back On Track

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Written by Timothy Sykes
Updated 4/21/2023 6 min read

Last week I took five trades…four of them were winners.

And while I haven’t recovered all of my April losses yet…I’m starting to find some traction.  

The emotional toll of drawdowns can tear through your psyche like a hurricane.

Part of you wishes you never made the dumb mistakes in the first place. Another part wants to make up the losses right away.

However, that’s not going to help you get out of a hole.

If you find yourself in a similar situation then listen up.

I’ve discovered three powerful techniques that have helped me get back on track. And if you’re struggling with your trading right now, then I invite you to try these three adjustments…

It might be exactly what you need to get out of a funk…

 

What They Don’t Tell You About Trading

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There are so many setups, strategies, execution techniques, and risk management methods you have to learn in the beginning.

Studying…learning…and then applying it to the market.

However, what you soon find out is that there’s much more to trading than just technique.

You also have to learn how to manage your emotions.

For example, my recent drawdown is all mental.

I was trying to force winning trades and stack my profits up.

Instead of focusing on A+ setups, I was feeling FOMO, trying to make up for trades I missed.

The problem with taking subpar setups is that it takes your focus away from potentially bigger and better plays.

And if those subpar setups resulted in losses. Then you’re likely to be hesitant when a real opportunity hits because you’ll be worried about losing or getting in an even deeper hole.

It’s a slippery slope.

I’ve been trading for over 20 years, and despite $7.4 million in trading profits, I still fall victim to these mind games.

Here’s what I’ve been doing lately to get out of this funk…

Staying Conservative

bonus tip 2 to the best trading risk management
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I believe you should always have a big picture view of the markets. And although I don’t necessarily trade “the market” I want to know the overall trend and sentiment.

It’s earnings season…and a lot of OTCs are kind of dead.

Although we’ve seen some massive Supernovas in listed stocks.

The overall market has been choppy…and it’s hard to get a good read on where we go next.

That’s why I have been staying conservative with my plays.

I’ve been trading smaller.

This allows me to watch the plays unfold without getting overly emotional. It also gives me a chance to find my rhythm without it costing me too much.

Because I’m trading smaller I’m more focused on the setups and plays and less on the profits and losses.

I’m doing this to build my confidence back up—something I teach my students to do. 

Swinging For Contact

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I know there’s a lot of temptation to get back those losses when you’re down. But you’re already at a heightened emotional state, and more likely to make irrational decisions.

That’s why it’s better to just rack up small wins to build your confidence back up.

While these small wins might not put a dent in your trading hole…it’s more important to have the right mindset.

When good opportunities arise…you’ll be ready to take advantage of them and not gun shy.

After you start winning more than losing…you can play for bigger moves…but right now you want to just get wins under your belt.

Don’t Be Afraid To Tinker

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One of the advantages of trading smaller is you can try new stuff or tweak your current approach.

I’m doing that right now.

Tinkering with my entries and the setups I’m taking.

Now, this isn’t random. I’m reviewing my trades and mistakes, and trying to workout solutions on how to improve my results…

That’s what I mean by tinkering.

I’m still sticking to my best setups…like panic dip buys…the weekend trade….and Supernovas.

Final Note

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Drawdowns suck…but they are part of trading.

The key is understanding that you’re doing something wrong and now you have to take steps to correct it.

Resist the urge to try to get back your losses right away…and start slowly working yourself back up.

If you’d like to learn more about how I’ve helped mentor over 30 of my students on their millionaire journey…then click here for the details. 


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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 (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”