Week of 2/08/16

This week I placed a trade on Lumber Liquidators (LL) after the CDC released a statement indicating that LL’s flooring had a “low risk” of causing cancer. I made about $84 in this trade, and although it isn’t a large amount of money, this trade was my first after having a big loss last month. Here’s what I learned this week:

A win is a win, regardless of the amount. Of course I would have preferred to make more money, but I do not take any win for granted. Trading is not the easiest thing to master, so any win and lesson is welcomed.

Follow your instincts. These will get better with time, but when you start noticing certain patterns, pat yourself on the back and take solid notes on your observations.

Do not place a trade that you can’t monitor. I work in a small office, which can be advantageous at times, but most of the time it means that I am in and out of meetings constantly. The market sentiment right now is very volatile, so I don’t trade unless I know I will be able to monitor the trade through out the day.

“Pulling the trigger” on a trade after a loss is not the easiest thing to do, but losses happen and accepting this will make it much easier.

Before placing your first trade

The list below includes things that I wish I had known before I placed my first trade:

  1. Pattern Day Trader: so this means that if you execute four or more day trades or “roundtrips” within 5 business days you’re a “pattern day trader”. Now if you’re a pattern day trader, you have to have at least $25,000 in your account and can only trade in a margin account.
  2. Margin account: an account that allows you to borrow money from the brokerage firm. This may vary on the broker you decide to use, I have a TDAmeritrade account and an ETrade account and both have a minimum margin requirement of $2,000.00 (which is the industry minimum).
  3. Short selling: not a lot of brokers will let you short sell (this totally surprised me), and some of the ones that do I’ve never really heard of (like a true beginner) but I do know that ETrade is one of the best firms to short sell through, basically trading through ETrade is awesome regardless if you’re selling or buying. I’ll definitely get more detailed about short selling in a different post.
  4. Pump and dump: this is basically a scheme to raise the stock price of a small company through false and misleading information that is fed to the marketplace through different sources (i.e. social media, chatrooms, bulletins, etc.). This is usually done by people that hold a large portion of shares (company insiders) through paid promoters so that they can sell their shares at a higher price.
  5. Tracking your trades: this is a must! I didn’t do this when I first started and every time I lost a trade, I didn’t even have the chance to look back and figure out what I could have have done differently. I started tracking my trades through profit.ly, which is a social trading platform that lets you post your trades publicly. I love using this site because it allows you to remain accountable for your trades, as well as track them accurately.

Now there’s a ton of stuff that I don’t know yet, but starting by knowing these five things can be very helpful. Please feel free to share things you wished you had known when you started trading 🙂

A little more persistence, a little more effort, and what seemed hopeless failure may turn to glorious success.

Elbert Hubbard

Week of 1/25/16

Sometimes you win some, and sometimes you lose some…this week was the latter. Losing sucks, the bigger the loss, the deeper the cut can be. I placed a trade on AFMD as soon as the market opened, Affimed (AFMD) entered into a clinical research collaboration with Merck (MRK) and I got overly excited and decided to pull the trigger without even looking at the MACD. The lessons here are:

  • Do not pull the trigger without any substantial signals. Although the news were positive, that doesn’t always equate to climbing stock prices.
  • Emotions are great, just don’t base decisions that have nothing to do with emotions on them. As excited and optimistic as I was, I quickly learned that my optimism transformed into hope in a matter of seconds (hope is always a last resort in any situation).
  • Cut your losses short. The moment you start “hoping” your trade will go as you want it to, you’ve stayed in it too long.
  • An association to a big name company can help the little guy, just make sure that the stock price reflects your hypothesis.

Although I lost about $445 on this trade, I did not lose my will to trade and that’s really all that matters. Remember when I told you about losing a huge portion of my small account on one trade (25%)? Well I could barely catch my breath after that trade, I didn’t even want to look at a stock chart for a couple of days, much less place another trade. I gave in to my fear of losing money and didn’t trade for a while, but this time I didn’t focus on the negative emotions that came with the loss, but rather on the mistakes I made and how I could fix them. Losing is part of the game, mistakes will be made (we’re not perfect and that’s perfectly fine) and as long as you are willing to analyze your mistakes and move on, well then you’re one step closer to your goal.

For starters…

You can read everything and anything on trading, but actually doing it, is extremely different. My interest in the stock market started when I took a Money and Banking class in college, my professor was teaching us about options and towards the end of solving an equation he said “and there you go, $15,000 just like that”. Now most of us don’t have that kind of money, so it’s safe to say that his care-free remark sparked my interest in the stock market. I finally got the guts to really dive into it about a year and a half ago, I began reading investing books, then worked my way to trading books. After reading “enough” (you can never read enough), I decided to paper trade through TDAmeritrade’s thinkorswim program. Paper trading is great to get used to the program, there is no worse feeling than losing money when you don’t know what certain buttons do (as I would come to find out…), but it’s not as effective in providing you with the mental stability you have to have when you trade your own money. When you trade with your own money, you suddenly become very aware of how long it took you to save up $2000, so when you trade and lose $400, that hurts a lot. I remember when I lost about 25% of my small account on one trade, I couldn’t even stand up, it was awful. But that is the type of thing that most people do not understand until they’ve experienced it themselves, and when you do experience it, know that you have to go through it in order to learn; it’s not like any other profession, usually you make a mistake and someone from the IT department magically “erases it” (God bless the IT department), but not with trading. As long as you are comfortable with the fact that you will lose a trade from time to time, you will do better at riding profits out. I have yet to master this, but I can tell you that I am doing much better than I was when I placed my first trade six months ago. So here I am, trying to get a handle of this “mental stability” concept, won’t be an overnight change, but I value any progress made 🙂

Welcome!

My name is Alejandra, and just like you, I am a beginner when it comes to day trading. I started about six months ago, not knowing exactly how to even start trading, but I knew I was passionate enough about it that I wanted to become a full-time day trader. Before I even started trading, I read as much as I could on investing and trading, but reading it and actually doing it are completely different struggles. My first three months, I was completely lost and made extremely simple mistakes, which cost me a large portion of my small account. That’s when I decided to step back and learn from my mistakes, a process that is necessary and never ending, and managed to regain my losses and a little extra. This is my journey to becoming a full-time day trader; the ups, the downs, and everything in between, I hope you enjoy the ride!