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3 Ways To Avoid Overtrading

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Written by Timothy Sykes
Updated 10/11/2022 5 min read

I KNOW what’s going through your head right now.

With markets peering over the cliff, you’re thinking…I can make bank if I short the market here.

So you buy a couple of put options on the S&P 500 for a few hundred bucks and wait.

Time passes, and the market chops around for a few days.

You get impatient and cut the trade at a small loss.

The moment you do, stocks plunge.

Cursing your luck, you jump back into your short, only to watch the market flip like a pancake and rip higher.

Now, you’ve more than doubled your loss.

I’m just like everyone else. I get jealous when I miss a trade, especially when others score huge profits.

But let me tell you the secret to my long-term success…

My best trades are the ones I never take.

Yes, I still make mistakes, take ugly setups, or ignore my gut.

However, I accept my flaws.

Rather than fight them, I work with them using three simple techniques.

These can help you avoid overtrading and keep your losses to a minimum.

Because I promise you, not everyone will survive this market.

I want you to not only make it through but be in a position to capitalize on the huge opportunities that await us on the other side.

Limit Your Trading Hours

Tim Sykes celebrates the sunset in Dubai after creating his watchlist
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My good friend Tim Bohen is a giant of a man.

Yet, he knows his limits.

Like me, he’d rather limit his trading to just a few hours a day, freeing up the rest of his time for his family or, in my case, travel.

While news catalysts can come out at any time, the majority of them tend to be released around 8:30 a.m. est.

If you like quick action and are good at managing risk, premarket trading might be right up your alley.

The most active trading time happens right at the 9:30 a.m. est open.

This is when traders and funds jockey for position and market makers work on price discovery.

It’s a great time to find quick opportunities for morning panic dip buys.

Other traders, like Mr. Bohen, will wait until after 9:45 a.m. to look for trades.

Usually around 2:00 p.m. est or later, I can find trades for stocks that have pulled back hard or are on a multi-day run.

What should be obvious is that I tend not to trade between 11:00 a.m. to 2:00 p.m.

I’m not saying I never do, but it’s not very common.

And traders who want A+ setups are better off finding the time window that works for them and sticking with it.

Cap Your Trades And Losses

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A great way to keep yourself in check is by setting a maximum number of trades you take per day and per week.

Notice how I didn’t specify they had to be losses.

Overtrading doesn’t just come from revenge. It also happens when we get overconfident.

In fact, folks with pattern day trading (PDT) are automatically limited to three roundtrip trades per five trading days.

A lot of people see that as an obstacle.

I see it as a benefit.

PDT accounts already have a mechanism built into them that prevents overtrading.

That means you only need to set a maximum loss limit for the day and/or week.

This is especially important when markets are choppy as they are right now.

Stick With One Pattern

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I made my first $1 million trading with my Supernova pattern.

People get it in their heads they have to trade multiple times every day to make money. Otherwise, they’re losing out.

Nothing could be further from the truth.

All it takes is one pattern and well-crafted setups to consistently generate profits.

It won’t make you a millionaire in a month. But it can over time.

I have more than 20+ millionaire students I taught to trade using this same pattern who went on to develop their own methods and strategies.

Even one well-placed trade per week can generate incredible wealth over time.

What I love about my Supernova pattern is how easy it is to identify, and how well it works with small accounts.

If you’ve never tried it, I encourage you to check it out. You won’t be disappointed.


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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”