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Trading Lessons

Is This The Most Underrated Weapon In Trading?

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Written by Timothy Sykes
Updated 4/20/2023 4 min read

There are many things top traders do better than the majority of traders who lose money.

For instance, they do a significantly better job at their trade selection, risk management, position sizing, and are far more patient and disciplined.

At the end of the day, if you want to maximize your potential then you need to cut out all the bad stuff you’re doing, whether that’s overtrading, overly aggressive, lack of discipline…or whatever…

It must be eliminated.

And you have to make it a priority.

You don’t want to be one of those traders who has a great win but then constantly coughs up those gains because they make dumb trades.

So how do you avoid making those costly mistakes?

It all starts with this….


How To Avoid Getting Into Bad Trades

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Now, It might sound like I’m preaching here but believe me…

I am speaking to myself right now. I haven’t been trading great the last few weeks so this is something I need to hear too.

The best way to avoid bad trades is to not trade them entirely.

Sounds simple right?

In theory sure…but trading is very mental. 

Sometimes our emotions drive us to make poor decisions.

That’s why you need tools to help you to stay on the right track.

A Simple But Powerful Tool: Pre-Trade Checklist

swing trading vs day trading
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If you’re constantly finding yourself in bad trades then you’re clearing doing something wrong.

There’s no pretty way of saying it.

One way you can begin to correct the problem is by having a pre-trade checklist.

A simple set of questions you must answer before you place the trade.

Here are a few examples of questions for a pre-trade checklist:

  • Is This One of My A+ Setups?

One way we get ourselves in trouble is by style drifting or taking trades that are new or unprofitable. A good way to break that habit is to ask yourself if the trade is an A+ setup.

  • Do I Have An Exit Strategy (Profit and Loss Targets)?

Sometimes traders will jump into something because they hear a rumor or see a breaking news story…but they have no idea what they’re doing when they’re in. Try to have a target on where you want to take profits and cut losses. If you don’t do this then you’re likely to get super emotional and take a bunch of losses.

  • Is There A Reason To Be In This Trade? 

There are several reasons one might want to be in a trade. It could be technical, like you like the price level it’s trading at, or it could be catalyst-driven, like press-release. You should have a good reason for why you want to risk your hard earned money. 

  • How Is The Overall Market, Is This Trade Going With Or Against The Trend?

Sometimes you can come across a beautiful long setup…but the overall market can be puking…

You want to be aware of the overall market sentiment. I’ve discovered that taking fast profits and cutting losses quickly works best in this choppy market.

  • Does This Trade Fit A Trend Currently Working In The Market?

Lately I’ve been focused on AI-related stocks because that’s where the action has been.

Trading stocks that have hot themes offer great opportunities because they tend to experience above average volatility.

On the other hand, if you’re trading something that doesn’t have a catalyst then it might be harder to trade because it will be less volatile.

Themes come and go. You want to be early and not late.

Final Note

how to get into stocks for beginners
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Your pre-trade checklist doesn’t have to be elaborate.

It’s there to help you stay on course.

The above questions are just suggestions. I would love to hear what yours are in the comments section below.

If you’d like to learn more about my mentoring program then follow this link.  

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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

* 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”