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Warning – Did You Trade in 2020?

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Written by Timothy Sykes
Updated 5/23/2022 5 min read

Hey trader. Tim here.

If you trade stocks the same way you did last year, or God forbid, 2020…

You’re in DANGER!

Markets created incredible opportunities when they bounced…

But they also led to some terrible habits.

Don’t worry.

If you’re reading this then you’ve already taken the first step towards avoiding these pitfalls.

Because I’ll let you in on a little secret.

My largest losses for 2021 were caused by one single problem…

A Lack of Discipline

Just read the comments above and you’ll see how I broke my own rules.

Yet, I still managed to pull in over $1 MILLION for the year.

You see, over the years, I managed to make these occurrences smaller and rarer through discipline.

The best part – I didn’t have to give up too much of my profits.

Discipline isn’t something that comes naturally to me. I’ve had to work hard at developing it.

But if you want to climb the ranks and become a seven-figure (or even eight-figure) trader, then it’s something you’ve gotta master.

Below you’ll learn what my best practices are and how I’ve been able to stay consistently profitable for nearly two decades.

Recognize

Markets aren’t the same as they were in 2020, let alone six months ago.

In fact, we haven’t had to face a hawkish Federal Reserve since the Great Recession over a decade ago.

Now, they’ll raise interest rates even if stocks take it on the chin.

Markets go through cycles. They can last months, years, or even decades.

The last time we faced inflation like this was in the 1970s.

Take a look at how the S&P 500 performed during that decade.

Source: Tradingview

That is a whole lot of nothing for those buy-and-hold types.

We could easily see that kind of market again.

2020 was so unique because the very moment that markets bottomed was when everyone was stuck at home.

With not much going on, folks decided to buy stocks, and rode one of the best rebounds in market history.

It didn’t really matter what you bought, everything went higher.

In 2021, meme stocks took their turn, burning shorts and sending garbage names into the stratosphere.

Those who wanted to bet against AMC Theaters (NYSE: AMC) or GameStop (NYSE: GME) couldn’t afford their positions.

All of that is gone.

We will probably see a time when buy-and-hold does work again.

But the meme, cannabis, and even high-growth tech stocks aren’t coming back any time soon.

This market is different, and we need to trade it differently.

Prepare

Recently, I’ve cut my position sizes substantially for almost all of my trades.

I’m more focused on testing the waters and collecting data than I am on swinging for the fences.

Once I recognize the shift in markets, I begin to prepare.

Honestly, I have no idea what the hot sectors will be next year.

That doesn’t really matter.

By making small bets and trades, I probe different areas of the market, looking for clues to the next move.

But I want to make one thing very clear…

I am NOT taking trades at random. This is a methodical approach. In fact, I could do it with a simulated account.

That’s why I keep a trading plan at all times.

This is one of the hardest things for my students to keep up with.

Believe it or not, it takes practice. Yes, I actually practice making and reviewing my trading plan.

Seriously, once you put together a trading plan, all you need to do is practice a few times a week.

That’s it.

Discipline isn’t about beating your head against the desk for hours.

It’s about doing the right things consistently.

With my trading plan, I can accomplish this in 30 minutes just a few days a week.

All I need to do is sit down, screen for stocks, write out a handful of trade setups, and trade a couple each week.

That’s it.

Patience

These aren’t easy markets to trade.

Watching stocks chop back and forth makes you feel like you’re missing a setup in there somewhere.

Discipline means keeping yourself out of the market as much as it means staying in the market.

I have a lot of students eager to watch me signal my next trade.

But I learned the hard way, as I’m sure many of you have, that forced trades don’t usually work out.

Patience isn’t easy. It takes practice just like a trading plan.

We all slip up from time to time. So cut yourself some slack.

The goal isn’t to be perfect 100% of the time. It’s to keep getting better.

With that in mind, I want to teach you the #1 pattern in my library.

This pattern is so powerful it works in ANY market, bear or bull.

And it’s simple to find once you know what to look for.

Click here to find out more about my Supernova Pattern.

—Tim


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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”