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The Trifecta of Trading: Three Essential Questions to Ask Yourself

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Written by Timothy Sykes
Updated 7/13/2023 6 min read

The difference between making it as a trader and being another statistic often boils down to a few crucial questions you constantly need to ask yourself.

Get them right…

And the sky’s the limit.

Mess them up…and well…you can guess where that road leads.

Want to know what these game-changing questions are?

Are You Maintaining Consistency?

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I have never claimed to be the world’s best trader.

If you dissect my trading…you’ll find several flaws.

But that’s the thing…you don’t have to be perfect to make money in this game.

I’ve been consistently profitable year after year because I do a few things right.

By focusing on answering these three questions, I’ve outlasted most traders…

I’ve been doing this for +20 years…but what’s even more exciting is that I’ve played a role in many of my student’s success.

Here are some more questions about consistency that you should address…

  • Do you have a consistent trading routine, like creating a morning watchlist or a process to generate ideas?
  • Are you journaling and reviewing your trades?
  • Are you staying true to your trading rules?
  • Are you maintaining emotional consistency and avoiding extreme reactions to wins or losses?

You must be consistent if you want to win in this game.

 

Are You Staying Patient & Disciplined?

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Fortunes are made and lost in the stock market each day.

It’s exciting.

The problem is a lot of newbie traders mistake that opportunity for an excuse to gamble.

The stock market isn’t a casino.

If you approach trading like gambling, your chances of making it are slim.

That’s why I preach to my students to stay patient and disciplined.

Your first year should be spent STUDYING…STUDYING…STUDYING.

That’s where you need to exercise your patience and discipline.

If you’re farther along your journey, you’ll want to focus on trading your best setups.

By reviewing your trades, you’ll slowly identify your strengths and weaknesses.

Focus on what you are good at…and experiment and learn new strategies that you believe can make you more successful.

If you’re making money on your best trades and then gambling and losing on setups you don’t know or letting FOMO get the best of you…

Well…your results will probably suck.

Are You Focused On Risk?

I’m not afraid to say that I trade like a coward.

Why?

Because I trade volatile stocks…many of them are companies with no fundamentals whatsoever.

What can I say…it’s a scary business.

I’ve taken some BIG losses in my career…and the feeling is miserable.

It’s also pretty stupid to bust your butt studying, working hard, building your account up…only to have one or two bad trades wipe out all that progress.

I go into my trades knowing that I can be wrong…

Knowing that if I’m not focused that I can easily get crushed.

That’s why I tell my students to cut losses quickly. 

Who cares if you make a lot of money from single trades…if you’re also taking big losses, then you’re not going anywhere.

Also, if you can manage risk properly, that gives you more room to learn and develop the skills you need to become a successful trader.

It’s unlikely you’ll make money your first year…that’s why protecting capital is so important. And it remains vital throughout your career.

 

Last Word

© Millionaire Media, LLC

You’ll never hear from me that trading is easy.

But I believe there is a way to reach your goals faster if you follow a proven process.

If you’d like to know what that is…

Then I Invite you to attend one of my free live training classes. 

Click here to schedule a time that works for you. 

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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”