One of the worst errors a trader can make is not heeding the market, not listening to the tape telling you what is truly happening with your selection, and 'freezing', hesitating hitting the sell button, not taking the 1/8th, 1/4 point loss when you can and rather seeing the 1/4 pt. balloon into something larger. Traders sometimes compound this by then becoming 'investors', taking home stock overnight when they cannot control losses, and infact the odds are even more against them because the stock probably wasnt doing well, leading to taking it home, thus increasing the chances of bad news.
Traders then talk fundamentals, earnings, blah, blah, blah, whatever it is that helps them sleep at night knowing they just took home a concentrated position in abcd, praying that their stock is not the Hot Stock of the day for Joe Kernen or David Faber, a percentage loser.
Now investors, well, first off they SHOULDNT be so concentrated in positions, they should be diversified, they are looking for more than 1/4s and 3/8 and have to deal with the risks associated with various sectors,so lets leave investing out of this, as its an entirely different animal.
The worst trade I had two years ago dealt with Centennial Technologies. I had traded that thing from 5 to 50 on the NYSE, 1/4s, here, 1/2 there, a couple multipoint gains each day. To an extent, it was reasonable timing, but more the stock on a tear.
The stock then began to tank. My feeling with overpriced stocks is that they break and continue to break. This stock was breaking and breaking hard. I promised I wouldnt touch the thing, it was garbage and wouldnt get my money no way, no how. Well, in some wild 2, 3 weeks, the thing fell from like 50 to 17ish.
Friday, 2 Januarys ago, of course, hey, that had to be the bottom. **KEY** Going into it for daytrading purposes, I bot a nice position, about 6K of this dog, I think it was like 17 1/4 down 2 and change. The stock real starts tanking and quickly its down another 3/8, 1/2 or so. So, I compound my stupidity and buy another 2k at right near the lows. It was pretty nice position, probably the largest I had taken in a few weeks for day trading, about 30% of the acount at the time. The stock was absolutely wild and every little bone in my body said "GET OUT IDIOT". The stock recovered a bit, probably to the point where i was out some 1/8 or 1/4, relatively speaking, pennies.
What did I do? I took it home....can you say FOOLISH...anyway, I dont' know how many of you remember, first thing monday (i mean I wasnt a holder more than 50 trading minutes), Dow Jones News...
Centenial Tech...CEO Arrested, insider fraud, they're shipping milk crates instead of semiconductors stuff. Thats not good..
They halt the stock for about 2 weeks I think. I'm not very happy, they are talking about search and seizures, etc. While the position is only 30% of my daytrading account (i keep a few accounts, one for long term investments, one for position trading and one for daytrading - call it regimented, but it helps me atleast), when 30% goes to zero, you're down 30%. Atleast it made the math simple.
Anyway, i think it was about 2 weeks or so, a long time for a nYSE halt,..they usually try to get it open and let people out, let the market figure a reasonable price...it opens at like 2.
Nothing like dropping a 100+K real quick. Forget how much you make, what your principal is, as traders, the idea is to win, thats the goal, when you don't it stings...and 100k for ANYONE is real hard money.
Well the story actually gets better because in the freakish events ever, some interim CEO states something like "easy turnaround", 'not losing customers'. I figure, if I can afford to lose 16, I can lose 2 more...I buy 8 more...and in the most crazy, bizzarre (although relative to internet madness lately its not so wild), this piece of junk ran from 2 to 4 one day, 4 to 12 or so the next.
So here I am at 3:30, a major short squeeze going on, CTN is 12 1/1 up like 8 or something like that. I'm up like 4 pts on the whole position. I get cute, i start selling it in pieces of 2k as it was moving up about 3/8 every 2 minutes. I sell 2, 2, 2, 2, 2. I'm just about done when at 3:50 or so, THEY HALT THE BUGGER! I mean, the NYSE lets that thing act like that all day and THEN they halt it with 10 minutes to go. I had 4 left to sell. It was a sell imbalance, the specialist couldnt make an orderly market. THEY DONT OPEN IT. Unheard of because of a buy imbalance. Atleast theyshould open it so longs get can out, thats usually what they do for lack of news.
Anyway, no trades, no open, nada, zip.
They open it at 2 1/4 the next day.
Any profit...adios.
Losses...some, the exact amount, I'm not even sure.
Mental impact - it was a tension filled two weeks, not a smooth curve by any means.
The lesson - ifyou are investing, invest. Buy reasonable positions, set more moderate stops, if any. Never buy too much and average up if possible.
If trading, do as traders do. Imagine the ideal trader, the discipline and focus and committment to strategy and stick with it.
When I saw that CTN acting so bad, no way should I have guessed, as a trader, I could have picked a bottom. As an investor, if the model fit, perhaps 400 shares would have been OK, because its exposure is kept pretty light.
Traders - the most important thing you have is your principal. protect it, its like the code to windows 98. You lose it and you have nothing. its 100% the assets of your business. Keep losses small and tight. Let winners run and cut losses. Water your flowers and pull your weeds.
For me, thats the worst I ever had. Thank g-d in the end the lesson which will forver be jarredin my mind, didnt cost me an arm and leg.
-Steve@yamner.com |
