ADSP.. I will remember that symbol until the day I die.. Unlike our friend FUndamentals, I was greedy and threw all caution, and jumped into it with my entire account around 10 bucks.. Knowing full well that the shortened session historically produced ridiculous momentum runs.. that was the sad part- I KNEW but I just had dollar signs floating..In my defense, I knew it was a POS, and the company was in such bad shape that the stock would 100% be in the single digits in no time..
THe next morning that thing was trading at 20.. already it was too late to get out considering the massive lose I had taken.. Didnt even think puitting a stop at 30 would be needed since there was NO way it would fly that high.. Wrong again.. Ill never forget that feeling, sitting in my office and looking at it trading over 50.. I was stunned.. bankrupt, and watching the phone to see if my broker would call to force me out of the position.
In the end I survived.. THe broker knew I was a good client, and they let it ride into Monday.. Stock gapped down some 10-15 points and never looked back, but boy what a lesson I learned..
Fundamentals, Tom, Anthony Pacific and other professional shorters have better money management skills than myself and im assuming deeper pockets.. THey can afford to take a stock like KREM or ADSP and say ok, lets start a 10% position at 10, if it goes to 15 ill do another 20%, 20 ill add more.. and this allows them to ride out the storm in hopes that fundamentals catch up to the stock price and eventually they make a killing.. I simply cannot do this wether it be because im impatient or I dont have the cash reserves.. I decided to start a strict hit/miss strategy and since that day, it has never let me down.. THe only fly in the ointment would be on ADSP, where you get a gap of 10 points.. but if I properly allocated I would have stopped out, took a beating, but it would have been a mesquito bite rather than getting hit with a concrete block. Problem is we all want to get rich quick and that feeling never goes away, so without proper money management the career can end all to fast. I think its extremely important to realize how volatile the stock is and its difficult to do because once again greed comes into play.. A stock like STOR can move 10 points in 3 trades.. If it goes your way you can make a killing but when it gaps 20-30 points you need to be able to account for that. A while back I was fine tuning my hit/miss strategy and spent 2 weeks playing RBAK with 20 shares. (dont laugh) because out of about 30 trades, the lose never exceeded $100 but there were rougly 5 home runs that I made over 500 which in the end worked out to be a few thousand in profits after a few loses, break evens, and the 5 home runs.. off 20 shares.. but if I had positioned with 500-1000, it was impossible to control with my small account.
All that said tho- short selling is essential.. Not just because I believe the profits are quicker, greater and easier to make- but also because it forces you to learn money management skills.. ALlocation.. If you look at how Anthony shorts its priceless education.. ETYS, KIDE,STMP he just added small amounts all the way up and in 3-6 months the profits were astronomical. Also- understanding short selling will increase your profits on the long side incredibly.. The simple idea of using buy stops came from me getting caught in short squeezes. As they stop out im adding to the buying pressure, and as I buy into the stock, I immediateyl put the stop in and if the squeeze carries a point or two, which it usually does, I get a nice profit in under a minute.. Worse case, it fails to break out and I stop out immediately but the lose is controlled- or it forms a base at the resistance and I can either take break even or just set the stop and move elsewhere..
Its Saturday.. Im loaded with alot of hot air- sorry about the long message :) |
