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A Stock Story (How I learned to never run under the bus again)
My first stock lesson cost me a total of $31.73 but it felt like a hundred or more at the time. I started with $1000.00 and an eager uneducated position that was soon to take my money from me. I began by opening up a new trade account with the help of a 15 your old I met on the Internet on a stock BBS. He was able to show me the different pitfalls and fees associated with each broker and after a little research we decided that E*Trade was hands down the best broker for our penny stock trading. You see the 15 year old already knew it he just had to convince me, I found it difficult to take the advice of such a young person but soon realized he was knowledgeable and saved me a lot of hassle picking a broker. Well I choose the rapid funding option for my account but there was a stipulation in which I could not trade OTCBB stocks for seven days. Well the thing is I now had an account with $1000.00 and I was very eager to make a trade. So my first mistake was about to be realized. You see I had been doing my DD on penny stocks for days but now for the next seven days I could only trade in $5.00 stocks and above. Instead of being patient and waiting the seven days or doing new DD on $5.00 and up picks I had to make a purchase.
Mistake 1. Patience or lack there of.
You see being so eager I just wanted to go go go but this can quickly equate to lose lose lose. I decided to skip in depth DD and just pick a company I had heard of that seemed to be on an upward trend. This stock was HUF the Huffy Corporation. We have all heard of Huffy I had riding there bikes as a child and they had to be a good bet at $5.07 the previous days close was $5.35 with a 52 week high of over $8.00. How could I lose I could emotionally relate to this company it had to be a winner right?
Mistake 2. Not doing Due Diligence and buying on emotion
What I didn’t see was the news that was plainly posted on the Internet of HUF short earnings that had been announced that morning, it was bleak news at best for the share price. I made my purchase of 195 shares at $5.07 and paid the $9.99 trade commission on the deal and began to watch the stock stall and recede. I decided to research the stock after buying it and quickly realized with a sinking feeling in the pit of my stomach what I had done. I then watched the stock hopefully for several days as it would rise to $5.15 and back to $5.01 all the time waiting it to hit my $5.20 break even point so I could sell. After two days of this I decided I could not risk the stock going any lower and my risk tolerance was showing its true colors. I sold at $5.00 a share with a $9.99 commission costing me a grand total of $31.73. The funny thing about this story is that HUF is probably a good stock to own at $5.07 and had I been willing to wait I could have probably made money on the deal.
Mistake 3. Not having enough risk tolerance to make money.
I realize now that fast fortune building is a reality if you understand due diligence is a critical part of a purchase. You need to asses your risk tolerance because low cap and OTCBB stocks are not for the faint of heart. I also learned the most important lesson, patience is critical. If all these lessons only cost me $31.73 then I say its money well spent! I am now armed with the remainder of my money, a little more education and a much less eager attitude. My 7 day wait will be up Thursday and I plan to take my time and do my DD!
I hope this helps you newbies not make the same mistakes!
Posts: 262 | From: Columbia SC USA | Registered: Jan 2004
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You can say patience enough. I started 6 months ago with the same 1000 as you did on e*trade. I did my DD on a two companies, and luckily one took off right away. I still currently own the other one, but could kick myself. Because the second one took off and I held on too long. Although I am still in profitland, I missed out on 700 bucks if I had sold. Oh well patience, and then pull the trigger!
Posts: 88 | Registered: Jan 2004
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Randy, your first lesson only cost you a little over thirty bucks.
Pfffttt... I should be so lucky.
Wrote about this to another, it is a good practice to sell within five to ten percent of your projected high, or conversely, buy at the same percentage, for your low side projection.
Cutting it closer than five percent moves you into the "Greed Range" which will almost always get you.
Too many times I have thought and known, a stock will run up higher, a peak, and it does. However, I don't get "picked off" because volume is too low at the peak price.
By the time I cancel or change my sell order, prices drop below what I could have sold at very easily because of higher volume. Once entering a new sell order, have to wait for my turn, and prices fall below my new sell price. I end up chasing prices down trying to sell.
Simply, Greed bit me on my big rearend.
So now, I take a reasonable profit and run like crazy before the lynch mob catches up with me.
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I will listen to you. I have been following your posts very closley and I think you know your stuff. I know nothing but I am trying to learn as fast as I can and with help from people such as yourself I am making great strides. Thanks so much!
Posts: 262 | From: Columbia SC USA | Registered: Jan 2004
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It is obvious to me that your first mistake was owning and thus, riding a huffy. There was a brief period in the 80's when huffy had a respected BMX team. However, their frames were custom and certainly not built by Huffy, Inc. I'll skip forward, thus, ommiting the mongoose/mag-scrambler debate. I spent 10 years as a broker and now I do this(trading not writing)for myself. You are fortunate in your recent lesson. However, it only gets worse...lol. You see, the better you become, the more money you will have to trade with. That will lead to bigger positions, larger gains and yes, larger losses. I regularly take 50k losses...thankfully, I more regularly take gains. The point is you need to define your thresh-hold for pain and stick with it. Don't be afraid to take a loss, don't become emotionally attached to a stock and soon you will be losing the big bucks as well...just try and make more than you lose....lol.
Posts: 220 | From: San Marcos, Texas, usa | Registered: Dec 2003
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Don't feel alone...I am currently watching and learning...unfortunately I am doing more sponging off of others news, instead of contributing...but that is due to lack of knowledge and not because of laziness.
Posts: 88 | Registered: Jan 2004
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I broke a Huffy frame once. When I was younger. Doing a tabletop. I hurt my knee. I din't lose $35 though. Healthcare was cheaper then.
quote:Originally posted by drwright68: It is obvious to me that your first mistake was owning and thus, riding a huffy. There was a brief period in the 80's when huffy had a respected BMX team. However, their frames were custom and certainly not built by Huffy, Inc. I'll skip forward, thus, ommiting the mongoose/mag-scrambler debate. I spent 10 years as a broker and now I do this(trading not writing)for myself. You are fortunate in your recent lesson. However, it only gets worse...lol. You see, the better you become, the more money you will have to trade with. That will lead to bigger positions, larger gains and yes, larger losses. I regularly take 50k losses...thankfully, I more regularly take gains. The point is you need to define your thresh-hold for pain and stick with it. Don't be afraid to take a loss, don't become emotionally attached to a stock and soon you will be losing the big bucks as well...just try and make more than you lose....lol.