Saturday, January 29, 2011

My story.....Part 2

Last time, I had left you readers with a post on how I stumbled into trading. Let me share with you readers my first experiences with trading now. Here's part one of this series in case you missed it. I highly recommend giving that a read first if you haven't done so already, as that post tells a bit about my background and as I have come to now realize, our trading strategies are very much a reflection of who we are and quite often, teach us who we are.

Let's carry on. So, I decided to get into the markets. I often tell you readers that I have pretty much made every mistake in the book and learned from those mistakes. This post will show you that that line is no exaggeration. You have to remember those were days before Stocktwits and I didn't follow any trading blog. I still remember the first stock I purchased and the reasoning behind it. It was ASTI, a small cap solar research company. Why? Well, oil was going up and everybody knew renewable energy was the big thing. I reasoned that I couldn't go wrong with solar. Specially a company with government contracts and lots of patents. Instead of ASTI, I decided to go with ASTIZ, the warrants because they were "cheaper". Can't believe I was that stupid! I remember selling half of my stock for healthy gains and then keeping the other half for the long run. Did I have a stop loss? Hell no! I was a buy and hold guy ready to invest more if the stock went down. I was going for the home run. 

Then I bought WWAT, another renewable energy company. I saw this company first at 1.80 odd, if I remember correctly, and it had already run up huge by then in matter of months. From 0.50 or something. I would buy it on a pullback. Wasn't I smart? Surely a stock that had gone so high so fast, had to go down. I visited the yahoo boards and this company looked like the next big thing. There were posters with over 100% gains still holding on as this was just the beginning. I saw from the sidelines as the stock crossed the 2 level. Then 2.10. Finally, as it crossed 2.20 with volume (used to see a bit of the charts even back then), I couldn't wait any longer. This was easy money that I was missing. I jumped in. You guessed it right dear readers. I bought pretty much at the top. From then onwards, I was trying to find out the next "important" support level and going to yahoo boards trying to get the latest "information" about the company.

Then there was CXTI. I bought the stock at 0.35. It had plummeted from 6 odd if I remember correctly. Surely the stock was cheap now! So, I got some. 

It wasn't all that bad. I had handsome gains in IDMI and a few other stocks. Without a doubt, the best investment I made back then was NEP, my largest holding. Then came 2008. I had very little clue what was going on except that my account was going down, and going down fast. The bottom line is that my initial investment of 10000 dollars, a princely sum for a grad student, was reduced to 50% of its value in a matter of months. Well, for the first time in my life, I was well and truly defeated. 

I knew I was doing something wrong but I had no idea what. To say that I was discouraged would be an understatement. But at the same time, I had this feeling of getting back at the markets. The markets had taken my hard earned savings and I would take it back from the markets only. The markets owed me. Looking back, this emotion of blaming the markets and getting back at the markets was very wrong and could have proved disastrous. But at that time, it helped. I stopped looking at my account for a few months. I knew that I would be back. But next time, I was going to be better prepared. And the market was going to pay me back.

I will save the rest for another post. The story is just getting started.

Take care and good luck!

P.S.: For those keeping score, I sold the rest of my ASTI and WWAT position late last year for next to nothing to book capital losses. CXTI turned out to be fake. NEP dropped to under a dollar and then rose to over 10 dollars. I sold enough of my NEP position at 10+ to recover all of my initial investment in stocks. I continue to hold a very small position in it in my long term account to remind me of "those" days.


Anonymous said...

Can't wait for the next part.

Anonymous said...

Really enjoy the story so far. Wonder how many people's first trade was a penny stock ... Mine was a pump and dump ... Not good outcome when gaps down well below any stop loss.

Anonymous said...

Thanks for posting part 2. As a "newbie" I feel as if I'm trading the news, so to speak.

Looking forward to read your story on how you made the transition from being down 50% to your current stage. I just started with a $10K account myself and am down $2K.

Anonymous said...

Mine was JOEZ, I bought at the top in April 2010, with no stop it is down almost %50

positiontrader said...

Thanks for the comments guys.

Anon 1 - I will try to post the next part sometime in the coming week. Its a long story :).

Anon 2 - I don't trade any stock below 5 dollars now. CXTI was the only sub dollar stock I ever bought. Lesson learned.

Anon 3 - Take the losses as tuition fees to the market. Its alright as long as you are learning. Have realistic aims. If you can get through your first year being close to breakeven, you have done a great job! Never trade the news. Somebody always knows it before you do.

Anon 4 - The trouble with stocks like this is not only the monetary loss, but also the emotional loss. Not to mention the time loss where you could have actually recovered your money. It is indeed very liberating when you sell stocks like this! Hope you are doing better in trading now.

Maks said...

good read! thanks, I'll be patiently waiting on part III......

Anonymous said...

You think that's bad, my first trade was buying Bear Stearns at the very bottom and selling at $9.65 when JPM bumped their price..epic win right?

Put that money into LEH at $44...still had some at $1.35 lol :)

positiontrader said...

Oh well, you win! lol. At least, things can't get any worse!

Anonymous said...

Nice post. Thanks.