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Trading Recap

Should You Ever Change Your Trading Plan?

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Written by Timothy Sykes
Updated 5/16/2023 4 min read
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Very few things suck as much as watching a winning position turn into a losing trade.

It rarely happens to me, but I see it happening to many newbs.

Why?

Because when it comes to my trading, I’m flexible.

I’m constantly digesting information in real-time and making adjustments along the way.

For example, I would have been sitting on some hefty losses on Monday if it weren’t for my thinking last Friday.

We are all taught to stay disciplined…but when does it make sense to change the plan and make adjustments?

 

Why I Stay Flexible

Last Friday, I jumped into the ticker symbol IPA.

I bought this spiker on dip off the highs because I believed it would pop again. The company tweeted it had big news coming next week, so I figured there was a chance the stock could catch a bid.

I bought 3,000 shares at $3.35 in the afternoon, thinking it could run higher…

The plan was to hold these shares until Monday.

However, I felt I had to take profits with the stock surging. And I did, getting out of 2,000 shares at $3.82.

With 1,000 shares, the plan was to hold the rest into Monday. But with the stock trading well above $4.00, I felt like I should take my profits and call it a day. And that’s what I did, getting out at $.4.07.

It turns out that it was a good decision.

The stock didn’t do anything on Monday. In fact, it sold off by 30%.

When Should The Plan Change?

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My trade plan for IPA was initially to hold the trade until Monday. But with the stock hitting my profit targets early, I decided to take the trade-off.

But that’s not the only time I’m willing to adjust my trading plan.

For example, I’m constantly watching what the market is doing. 

If I’m in a trade that has a bullish setup, I’ll also be watching the overall market. If the overall market is weak or there is heavy selling pressure, that might impact my trade.

I might not get in…I might get in, but size into it small…

Not only did my profit targets hit in IPA, but the overall market was selling off, making it easier for me to decide to get out.

The bottom line, there are other factors you should consider.

If I’m trading a hot sector, like AI.

More Breaking News

I’m watching how other AI stocks are performing. In most cases, I want to go with the trend, not against it.

How I Stay Flexible

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  • I am staying Informed. Not only am I aware of what the stock I’m watching is doing, but I’m also paying attention to stocks in the same sector, market news, and how overall stocks perform.
  • Watching my levels. Call me old school, but I like looking at charts and using areas of support and resistance to guide my entries and exits.
  • Cut losses quickly. I have an idea, but I’m out if that idea is wrong. There’s no reason to be stubborn and fight the trade.

Bottom Line

Following a rules-based trading approach is probably best if you’re a newbie trader.

As you gain more experience, you’ll learn when to adjust your trading plan.

If you’d like to learn how I found the ticker IPA last Friday, this is the strategy I used. 

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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 (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”