Protecting your trading account is the single most important task in your trading career. Without an account to trade with, you aren’t going to go anywhere. In this post I am going to cover:
- Rule #1
- Your Two Accounts
- How To Protect Your Account
- Tips To Growing Your Accounts
- How To Track Your Accounts
If you are getting into trading or are curious about trading, then you probably know who Timothy Sykes is. In the event that you are so new and somehow fell onto my page before discovering Tim, then I will let you in on vital information that my mentor has drilled into my memory. This is RULE #1 – Cut Losses Quickly!
Those who follow this rule tend to trade another day. This is considered the most important rule that he has developed over 20+ years of trading. When you minimize your losses, your gains will grow your account. This allows you to keep protecting your trading account so you can stay alive on this battlefield.
For example, you create your watchlist with ticker XYZ… this stock has been running for multiple days and you develop a plan to dip-buy the morning panic once the stock has reached its minimum 10% panic. You follow your plan so you buy the stock at 10% panic but instead of the stock spiking immediately, the stock continues panicking. This is where you want to cut losses quickly and get out of the stock as it may need to panic further to a different support line. If you don’t cut your losses quickly and the stock continues to panic, you could potentially lose all your money or a substantial amount. But cutting losses quickly allows you to lose maybe 1%, 2%, or 5% of the amount you invested vs the entire amount.
Now say you reenter at the next support and you see the stock turn on your Level 2 (not sure what Level 2 is, here is a DVD that will teach you ALL you need-to-know about Level2). You renter at the new price and the stock spikes; now you made 10% on this trade. Low and behold, you just made back all of your losses thanks to cutting them quickly in the first place.
In this example, say you held as the stock continued to panic. Then you keep adding to your loser but it panics further. Your average price is lower and lower and lower without any spike. This grows your loss and the bounce doesn’t occur. It’s one of those occasions. Now you added to a loser AND your loss has seriously grown. That is why you cut your loss quickly which should be a part of your trading plan. These are real-life experiences that have happened to me so take them seriously. You will also have a chance to learn these patterns if you read this blog post that gives you different educational resources that will help you plan and prepare your trades!
Your Two Accounts
Your Trading Account
Timothy Sykes always talks about students having two accounts. One is your trading account. This is the account in which you trade with via real money or paper money. For those of you wondering the difference between paper money and real money, paper is a simulated account. StocksToTrade allows you to use fake money to simulate trading with a real account. This is wonderful for beginners who have very little to no trading experience and allows you to continue protecting your trading account so you don’t blow up while you are learning. I actually started with StocksToTrade paper trading so I could experience what it would be like trading. By using this platform, I learned to recognize First Green Days, Morning Panics, Breakouts, and other trading patterns!
A Real or Live Account means you are using your hard-earned money to trade with. You open a brokerage account and fund it with the money you transfer and you are off to the battlefield. But as simple as it sounds, that is not the safest way which leads us to your second account!
Your Knowledge Account
Timothy Sykes stresses to all students about the importance of your knowledge account. This account is filled with your experience, the lessons you’re learning on along this marathon, and the education that Tim teaches in his Trading Challenge. Both accounts are equally important. Your knowledge account allows you to stay in this “game”.
The knowledge account tells you:
- How to Make a Watchlist
- When to Take Profits
- When to Cut Losses
- How to Trade Your Plan
- How to Read a Chart
- How to Understand Trading “Jargon”
- And Everything Else Related to The Market
How To Protect Your Account
The best measures you can take towards protecting your account is educating yourself. Following Rule#1 is the best bit of education you could ask for and is a bit counterintuitive. Remember to Never EVER follow anyones alerts; this includes, Tim’s Alerts as his are for educational purposes only! When scrolling through Twitter, you will constantly hear tickers being thrown around and some people will talk about their profits. Avoid getting FOMO at all costs (fear of missing out) and avoid making trades because you “want to profit”. Such an approach can cause you to make irrational trades and lose. Undisciplined trading can also cause you to lose money. You want to avoid making random trades as well as avoid breaking your rules. Always remind yourself that this is YOUR JOURNEY, so don’t waste your energy comparing your profits to theirs.
Learning What NOT To Do
Do not trust anyone! This is protecting your trading account by not allowing your trust to go to the wrong people who are out to trick you into giving away your hard-earned money! A cynical approach should encourage you to perform your own due diligence. By having a cynical approach you shouldn’t believe in any non-transparent traders as you should always ask them to show you every trade. Example; entries and exits; along with, share size etc. You can typically find this information on Profit.ly.
If a trader does not show every single trade then DO NOT trust them. Another bit of advice is to not fall in love with a company nor its story. So many new traders fall in love with the story of companies and will have the “hold and hope” approach, this creates “bag holders” or traders that hold onto a losing stock and refuse to sell even if they are at zero. Don’t let your ego get in the way. It is okay to be wrong and is a common happening with trading. Take the loss and move on.
These are just some reasons that could kill your account and cause you to “blow up”. By investing in your education, you can equip yourself with the tools you need to avoid disaster! Hopefully you are willing enough to invest in yourself before taking a leap into the market. Look, you are already on the right track!
Tips To Growing Your Accounts
Thank you for taking the time to learn how YOU can grow your account. The best mindset you could have is the “Marathon Mindset”. So take into account the time it takes someone to become an expert at something… many believe it can take upwards of 10,000 hours. By dedicating yourself to studying the past history of stocks, you can be better prepared for the future.
How can you grow your account?
Here are some books that can assist you in your journey:
- The Complete PennyStock Course by Jamil Alluch
- An American HedgeFund by Timothy Sykes
- Reminiscences of a Stock Operator by Edwin Lefevre
- Japanese Candle Stick Charting by Steve Nison
- Extraordinary Popular Delusions and the Madness of Crowds by by Charles MacKay
- Bonus: Tim Raw is a DVD by Timothy Sykes that also includes about 100 books you should read regarding the Stock market and Business. I have only made it through the five listed above as of this blog post.
How To Track Your Accounts
Trader Sync and Profitly are very important tools you must use to track your trades! Trader Sync is your personal online trading journal that allows you to track every setup without using an excel spreadsheet, although it has a feature to convert your statistics into excel. You can take this journal anywhere with the app on your phone or use the web version on your laptop. This is a revolutionary journal that is helping traders track their trades with the quickness of convenience and more in-depth than a beginner trader could think of AND has all the statistics that a veteran trader needs.
Profitly is a public website that tracks your statistics and shares them with the world. Anyone can look at your trading performance and you can verify all your trades through your broker. Tim Sykes had his team develop this website to promote transparency within this shady industry. This is also where you will find your educational resources should you choose to study under Timothy Sykes as I do. I upload all my information on to Profitly, along with my watchlists and videos.
By using these two tools you are protecting your trading account and using the best resources available to optimize your trading performance!