I want to share my experience with you all so you don't repeat my catastrophic mistake. Until Jnauary of this year, I was a software engineer making 10K a month. I have always been involved in the stock market for the last 20 years. Made some, lost some. Last fall I came across a program called Tradestation that let you write strategies and test your strategies for profitability. After a counple of hundred hours programming, I became convinced that I have an edge in the markets and will be a very successfull daytrader. I quit my job and put 50k to work and opened a tradestation account. After a few days trading, I realized that chasing momentum was more profitable than my custom written strategies. I woke up at 5 am (pacific), followed the pre market and took positions on the runners. By mid April (yes 2 weeks ago), I was up about 30,000. Most of my gains came from daytrading security stocks like ipix, tasr, tbus, and mags. I generally did not hold positions overnight.
Confident with my abilities, I decided that MAGS should be a long term investment because I believed it will go to $100 by the end of the year. So I stopped daytrading Mags and gradually built a 4000 share position on full margin while the stock started to drop. The rest in simple. My 30k profit turned into a 40k loss. My initial 50k capital turned into 10k. The value of my account dropped 70,000 in 2 weeks. Thank G-D I kept my sanity. I have other financial resources that will help me recover from this. My wife does not even know about the disaster. If I don't recover the loss by the end of the year, I am thinking of not even declaring the loss on my taxes and keep it a secret till I die. I have added some money into the account. But realistically, I think greed overwhelmed me. I think I can recover over time but not willing to take the risks that will be required to overcome the loss. For me, it will be a gradual realization that greed will always take my money away. Be careful out there. Sharks love to take money from us small time players. Always protect your capital and cut your losses very quickly. And if you have a career, stick to it. Some of you may succeed and not be the idiot that I was. But the odds are against you. Don't repeat my mistake! Know when to chase the crowd and when the game is over. Recognize danger signs and forgo profits when the odds are against you. Be careful out there especially trading low float or in-fashionstocks. Good luck to you all.
Daytrader I just read your post. I did the same thing with BEAS, back in 2000---I had 50,000, built it up to 350,000 was heavy into margin against my husbands good judgement, then the bottom dropped out. I kept thinking the stock would rebound, trying to hide my losses from my husband. I ended up losing the entire investment. My husband forgave me but I'll never forget that horrible experience. With MAGS I lost money, but I only have in the market a small amount, because I know what can happen with fear and greed. You will overcome this, and it happened for a reason. Because if you were successful with full margin and MAGS you would have gone on to another stock, even heavier in margin and a bigger postion until the loss would be even greater. That's why I kept telling the longs on this board, newer investors, GET OUT OF MARGIN----margin is your enemy. You will be fine, at least you didn't have everything in the market. Mama
Mama, you had a painful lesson indeed! This was a great wake up call for me as it was for you. I love the market too much and that is the reason why I think I will recover and move on. I need some time off to regain my balance and slowly gain my confidence back. Thanks for your advise. Best of luck to you!
Everyone gets a few lessons like this. Mine was CMGI. It was a ton of $ you lost but you can make it up. I trade huge lots on small gains or losses. Never hold onto anything too long because of the chance it will go in the wrong direction. I shorted mags at 30 and covered at 29.50 then shorted again at 29.25 and covered at 28.50, and so on. I could have held until 15 and covered, but there is always that chance it would go to 100 or something even more ludicrous than it did. Greed will clean you out ever time. If you had a 500 dollar gain on MAGS in a day you should have taken it and ran. 500 a day is the same as 10k a month, but on your terms. No one has ever gone broke making a profit, lots of people have gone broke waiting for more. Greed has no place in the market.
One more important detail. Stay away from James Cramer. Do not trust what he says. Other stocks I lost a lot of money on, include EP, JNPR, NT all stocks that at one time or another were or still are his favourites. When daytrading, be nimble and take quick profits. End of story.
>>>Stay away from James Cramer<<<
That is the best advice anybody can listen to.
BTW...you've crushed my dreams on becoming a day-trader (well not really...but was a disheartning story). I'm waiting until later this year to quit my job as an engineer, and becoming a day trader. Once I get my my working capital to 100k (no margin!), I'm going to shoot for a .5% to 1% per day average return, without holding ANYTHING overnight. I think your theroy about daytrading momentum is a solid one...watch the open, jump in on the risers, get out after my .5% to 1% return. On a 100k investment, that would equate to $2,500 to $5,000 return per week. Works for me. Anybody heard of or use WizeTrade software? I'm thinking of purchasing. Thanks.
pooor baby 30k loss? big deal
i take 30k hits all the time
comes with game of being a trader
$100 target? what made u come up with that absurd target?
they make fences , nothing else