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Trading Lessons

Want to Earn More? Reduce Your Losses

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Written by Timothy Sykes
Updated 6/7/2022 5 min read

The most influential person in my trading career isn’t a hedge fund manager like Carl Icahn or Ray Dalio.

It’s my father.

Many of you probably don’t know this, but as a family-run business, my students can actually chat with my dad about trading.

When I was prepping for Friday’s live challenge webinar Q&A, I asked him what pressing topics I should cover.

He said to me…

I have never worked with a student that has consistently traded the same stock on the same day after a loss with any amount of success.

That’s a real eye-opener for traders who think it’s all about how much they win.

The reality is my P&L does better when I focus on minimizing losses.

Now, a lot of my students think that by cutting losses quickly, I would lose the majority of my trades.

They’re often surprised when they find out I tend to win more than I lose.

And it’s actually much easier than most of them think.

Don’t Chase the Trade

I’ve been trading for decades now, and I still make rookie mistakes from time to time.

Heck, just last week I went a bit too aggressive with Wikisoft (OTC: WSFT).

With this trade, I was mad at myself for not holding overnight.

That put me in the wrong mindset from the get-go.

I bought into the trade as it ran higher when I probably should’ve waited for a better morning dip.

Thankfully, I trained myself well and recognized the price action was a bit ‘toppy.’ So, I cut the trade for a small loss.

Entries on Price Action Bottoms

Now, when I trade the morning panic, I rely heavily on price action to tell me where the bottom is.

Some traders find this difficult to work with because it doesn’t specify an entry price ahead of time.

But that’ doesn’t mean you can’t come up with one.

Let’s go back to the chart of WSFT and a second entry I took that day (sorry dad!).

This spot was much more in line with what I like to see with morning panic buys.

Shares plunged on heavy volume before finding support just below the prior day’s close on equally heavy volume.

I want to look at those two candlesticks with the highest volume; one red and one green.

By the next candlestick, volume dropped off significantly.

Using this information, I can assume that the stock has reached a temporary bottom here.

This entire range goes from $0.315-$0.35.

If I use $0.315 as my stop, I can set my entry close by.

In this case, I got in at $0.33 and out at $0.345.

Mathematically, I got into the trade slightly below the halfway point of the range.

Doing this gives me wiggle room to let the trade try and work itself out.

Oftentimes, when a stock hits a morning panic low, even if it doesn’t bounce much, there’s usually an opportunity to pick up a few pennies.

Get Entries as Close to Your Stop as Possible

Tim Sykes checking his top penny stocks list in Italy
© Millionaire Media, LLC

This is the key to how I manage to obtain a higher win rate than I otherwise would.

When stocks don’t meet my entry prices, I let them go their own way.

If I chase them, I increase my potential risk. While that might allow me to catch a few more trades, those profits get swallowed up by the losses on the ones that don’t work out.

That’s why I’d rather wait to get filled at the entry price I choose than what the market may give me.

Think about it like this.

Imagine I’m looking at a stock that found a bottom around $0.90. Right now, it trades at $1. Ideally, it could get as high as $1.10.

If I bought it right here I would risk $0.10 to make $0.10.

But, if I bought it at $0.98, now I’m risking $0.08 to make $0.12.

An entry closer to my stop not only reduces my potential losses but increases the odds and size of my potential profits.

The Bottom Line

Don’t let the glitz and glamor of big wins that get thrown out on Twitter distract you.

I’m telling you right now, the ones who treat trading as a business, improving little by little, and building up their accounts over time are the ones who ultimately find success.

Now, there is one pattern that’s helped many of my students shorten the learning curve.

Check out my #1 trading pattern – Supernovas.



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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”