Metaphysx.com

I’m starting a new section here regarding stock trading. The following is a re-cap of what I’ve done so far. Stay tuned.
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As I’ve become a more active trader, I’ve definitely learned a few things. The most important thing is that once you have a plan/system… stick to it. Deviations can be quite costly.

Prior to opening my online brokerage account I did some research into the technical analysis that most day-traders and swing-traders use. To ensure the least amount of risk, even though my profits would be small, I found a candle-stick pattern that would form the basis of future investigations to find ‘good trades’. I ‘paper-traded’ this way for a few months and it seemed fairly reliable. The next step was to try it out with some real money.

I started with an initial $5500. With that, I bought 300 shares of INTV at $8.58/share. Within a week, the price went up to $8.85. Being conservative, I thought a 3% profit was good, so I sold it there and pocketed about $67 (after brokerage fees) which equated to a real profit of about 2.6%. So I learned to include the brokerage fees into my profit projections.

My next trade was to buy 90 shares of DTSI at $29.20. This one, though, started to go too far south than I was comfortable with, so I sold it at $28, accepting the loss. The trade itself was worth -$122 (after fees), which brought me down -$55 overall. Ugh!

Not yet discouraged, I bought 100 shares of USB at $32.36 and sold it a week later at $33.37. That was a small profit that brought me back in the black.

Next I bought 200 shares of CTDC at $8.86 and sold it at $10.14! I made over $200 on that trade!

Immediately after that, I bought 300 shares of CDS at $11.15. That’s when I made the mistake.

You see, there’s this concept of ‘settled funds’ to deal with. If you sell a stock, you have to wait about 3 days before the proceeds from that sale are officially credited to your account. I don’t mean just the profits, I mean the entire value of the sale. The kicker is that you are free to buy with those unsettled funds, but you can’t sell the new purchase until the previous sale has settled. I bought CDS with unsettled funds from the previous CTDC sale.

That day, I watched the stock run up to $11.90 and close at $11.85. The next day it opened at $12.50 and ran up to $12.95… but I couldn’t sell it yet. Ugh. The next day, the first day I could sell it, it closed at $10.60. Since October, it’s only been higher than that a few times. Those times when it was higher, rather than exiting and taking the loss, I let my emotions get in the way and I hung on hoping it would get high enough for me to break even. I’m still waiting. (more on that later)

Shortly after, a friend (an MBA with a finance background) told me he was buying into Countrywide (CFC) as they had just taken a big dump and the current price was a substantial discount. So I bought 150 shares of that at $18.45. (CFC closed Friday at $9.80).

I was beginning to feel really discouraged because my portfolio was in the red by about $1500. I reminded myself that when I started I said this was money I could throw away… but I still wasn’t happy about it.

At that point, I put in another $2500, bringing my total cash investment to an even $8k (though I was already down). CTDC came back into my “opportunity list”, so I bought 200 shares at $5.13 and sold it for $6.62 (making $298 in the process).

Then I found ARTG. I bought 300 shares at $4.63, but I noticed that day that it wasn’t going anywhere. I waited for a spike and sold it at $4.67… which meant a loss of about $7 after fees. Despite losing money, I think that was a good trade. I didn’t make any money, but at least I didn’t lose a lot.

But just then… CTDC came up on the radar again. I bought 300 shares at $6.08 and sold them at $6.44, making $94 (after fees).

In the meantime, to free up some funds, I went ahead and sold off some CDS at a slight loss. Just to get out of it, I sold off some CFC at a HUGE loss.

Right now I’m holding 450 shares of CDS and 50 of CFC. Tomorrow I plan to watch for a spike and sell both and take as little loss as I can manage. Then I’m going to stick to my system.

So, after my first few months of active/short-term trading, here’s what I’ve learned:

1. You can’t get uber-rich fast, unless you’re rich to start with. Small gains are good, because those give you more to play with and will turn into larger gains in the future.
2. If you spent the time working out a system that does well, don’t let your emotions get involved causing you to deviate from it. Losses are expected and part of the game. Accept the loss and move on. Your money is better-off in another trade with real potential than sitting in a trade hoping circumstances will change and that you’ll at least break-even.
3. While ‘investing’ may appreciate the input of others, ‘trading’ is not a team sport. Yahoo and Google forums, and your friends, might be valuable sources of information, but don’t let them dictate your trades without further research. (I will note here that after my own research, I still have a long-term position with CFC in my IRA.)

Finally, and I’ll make this an official disclaimer for the entire site… nothing posted here regarding finances nor the stock market is intended to as ‘advice’. Instead, it is simply posted for its entertainment value. Any views or speculation are those of an individual just playing around. Nothing posted should be construed as financial advice.