From The Start Of My Trading Career.

[themadride]

I hope some of you find this trading journal useful. I just started trading two weeks ago for the first time and I’ve already made some great money, great big mistakes, and learned a lot.
I plan to lay it all out here. I’m going to describe the greatest calls and dumbest of mistakes as well all the lessons I learn along the way.
I’ve been interested in stocks since childhood. Unfortunately, I never had any money to invest. In fact, I still don’t have any money. My wife and I are in our mid twenties and we have a one year old son. I own my own struggling business and my wife works outside of the home. I run my business from home and play Mr. Mom. Together we make less than 40,000 per year and live in a double wide trailer. On one hand we have very little to invest and many people might not even bother. On the other hand we have much more to gain than loose.

 

[themadride]

1st TRADE

1st TRADE: FAMILY DOLLAR (FDO)

I started my brokerage account with $400.00

For my first trade I took a Jim Cramer tip that I thought was both a good short and long term investment, picked a day that seemed like it might be bullish, and stuck my toes in the water.

Nov $25 Call FDO KE
- I bought in at $220.
- Sold at $275. I timed my exit perfectly. I got out on the absolute high point of the day.

After brokerage costs I had a net gain of $43.79.

Note: I was frankly thrilled to have only risked about 50% of my funds and made a 10% gain on my account.

 

[themadride]

2nd TRADE

2nd TRADE: HEINZ (HNZ)

Another Cramer tip. Heinz had a newly high dividend yield after the big market drop. Everything was “cheap”, but everything also seemed risky. I figured many people would see the logic of the dividend play…so I picked one and ran with it.

Nov $45 Call HNZ KI
- I bought in at $90.
- Sold at $130.

After brokerage costs I had a net gain of $28.79

Note: Two days in a row with good trades. Feeling 8 feet tall and bullet proof.

 

[UKtradergirl]

1st TRADE: FAMILY DOLLAR (FDO)

I started my brokerage account with $400.00

For my first trade I took a Jim Cramer tip that I thought was both a good short and long term investment, picked a day that seemed like it might be bullish, and stuck my toes in the water.

Nov $25 Call FDO KE
- I bought in at $220.
- Sold at $275. I timed my exit perfectly. I got out on the absolute high point of the day.

After brokerage costs I had a net gain of $43.79.

Note: I was frankly thrilled to have only risked about 50% of my funds and made a 10% gain on my account.

Don't want to put you off, congratulations on the win, but risking $200 to make $43.79 is very bad unless you get it right 99% of the time. I understand the having to risk half of your account thing, i've been there and done that, but you can adjust how much risk compared to reward you expect. For instance, if i was going to risk $200 i would want a reward of at least $250. Could you have not made this trade with a lower stop loss?

Saying that, you did call the market top. That was lucky this time. Well done. But remember... take small losses and big profits.. not the other away around. Especially important with small accounts as you will be crushed in no time.

 

[jeffsmith]

Don't want to put you off, congratulations on the win, but risking $200 to make $43.79 is very bad unless you get it right 99% of the time. I understand the having to risk half of your account thing, i've been there and done that, but you can adjust how much risk compared to reward you expect. For instance, if i was going to risk $200 i would want a reward of at least $250. Could you have not made this trade with a lower stop loss?..

Thats true really. Lower stop loss is very crucial especially while you have just begun. Stop loss and money mangaement form the crux of all trading.
Good luck with journal

 

[shadowninja]

Stop taking tips. It's a dangerous game to play.

 

[themadride]

Conversation

I hope you kind folks don't get offended if I ignore or rebuff some of your suggestions. Part of the reason why I decided to make this journal is because I wasn't pleased with the advice I heard and read when I decided to start.
I either don't understand or disagree with the argument that the small gain was a mistake because I risked too much for a small reward. Of course, before the trade I thought the stock could go much higher, but I think flexibility is a great thing. After I saw that it wasn't going to take off I decided to take my gains off the table.
It's easy to look back and see that the risk outweighed the gains I actually took, but I read about a lot of people who take losses because they refuse to be flexible and change their outlooks.
If we could accurately and precisely know our risk and reward exactly, then all the people who look at the charts or subscribe to websites like vectorvest or prorealtime would never make errors.
Which brings me to the idea of "Tips". I guess I also disagree with the blanket statement that one "shouldn't use tips". If a stock was a good bet before someone mentioned it....it should still be a good bet afterwards.
If we didn't take tips or learn from other's ideas...how would we even become aware of half of the stocks we buy? If I only traded the stocks of companies I knew personally, I guess I would be buying the IBM I'm typing on, the PapaJohns I'm eating, and the New Balance shoes I'm wearing. Those options are pretty limited.
In fact, I believe we must take "tips" to learn about other companies. I've never owned a pair of Rocky Boots, but after hearing a tip on them perhaps I come to the conclusion they are better than my New Balance. That was purely hypothetical by the way.

Perhaps I should expand a little on my PLAN so far. It may seem ass-backwards, but it's a work in progress.....as is everyone's I believe.

I never trade on a tip simply because of the tip. It is just a jumping off point. Also, I never use indicators except to reaffirm what I already believe will happen.

I try to find the best of bread type stocks to go long on bullish days and I try to find the real stinkers for the days when things are bearish.

I do my best to be 100% back in cash at the end of every day. I may let the trade ride if I am down and feel like it will bounce back, or if I'm experiencing great upward momentum.

Finally...(I know so many people will disagree with this), but if I believe the trade was a good move, but it's not going my way...I plan to let it ride and buy in at a lower rate to dollar cost average my exposure.

If I were a "day trader" with a margin account I might play things a little different.

I know many of you may be agasp with so much disagreement, but try to keep it to a minimum please. I'm going to update with the rest of my trades so far in a few minutes....and I'm sure they too will give you all plenty of ammunition against my trading strategy.

 

[UKtradergirl]

I hope you kind folks don't get offended if I ignore or rebuff some of your suggestions. Part of the reason why I decided to make this journal is because I wasn't pleased with the advice I heard and read when I decided to start.
I either don't understand or disagree with the argument that the small gain was a mistake because I risked too much for a small reward. Of course, before the trade I thought the stock could go much higher, but I think flexibility is a great thing. After I saw that it wasn't going to take off I decided to take my gains off the table.
It's easy to look back and see that the risk outweighed the gains I actually took, but I read about a lot of people who take losses because they refuse to be flexible and change their outlooks.
If we could accurately and precisely know our risk and reward exactly, then all the people who look at the charts or subscribe to websites like vectorvest or prorealtime would never make errors.
Which brings me to the idea of "Tips". I guess I also disagree with the blanket statement that one "shouldn't use tips". If a stock was a good bet before someone mentioned it....it should still be a good bet afterwards.
If we didn't take tips or learn from other's ideas...how would we even become aware of half of the stocks we buy? If I only traded the stocks of companies I knew personally, I guess I would be buying the IBM I'm typing on, the PapaJohns I'm eating, and the New Balance shoes I'm wearing. Those options are pretty limited.
In fact, I believe we must take "tips" to learn about other companies. I've never owned a pair of Rocky Boots, but after hearing a tip on them perhaps I come to the conclusion they are better than my New Balance. That was purely hypothetical by the way.

Perhaps I should expand a little on my PLAN so far. It may seem ass-backwards, but it's a work in progress.....as is everyone's I believe.

I never trade on a tip simply because of the tip. It is just a jumping off point. Also, I never use indicators except to reaffirm what I already believe will happen.

I try to find the best of bread type stocks to go long on bullish days and I try to find the real stinkers for the days when things are bearish.

I do my best to be 100% back in cash at the end of every day. I may let the trade ride if I am down and feel like it will bounce back, or if I'm experiencing great upward momentum.

Finally...(I know so many people will disagree with this), but if I believe the trade was a good move, but it's not going my way...I plan to let it ride and buy in at a lower rate to dollar cost average my exposure.

If I were a "day trader" with a margin account I might play things a little different.

I know many of you may be agasp with so much disagreement, but try to keep it to a minimum please. I'm going to update with the rest of my trades so far in a few minutes....and I'm sure they too will give you all plenty of ammunition against my trading strategy.

I was not personally attacking you or your trading strategy. I was merely worried when i read that you risked 50% of your account on one trade. Do you really think you cannot be wrong more than twice in a row!!!!

There is also nothing wrong with cutting losses instead of letting them ride. If you cut immediately it doesn't mean you are out of the game, you can just wait for the trade to show another setup and enter again at a different point. For instance, you thought a stock was going to go up. You buy it and it goes down say... 100 points before coming back up and going into a profit. In your instance, you took 100 points risk. The stock might come back, it might not. If however you had taken say a 20 point stop loss.. you would have only lost 20 points and you could re-enter on the way back up (or not enter if it continued down even further).

I'm not saying i know everything and by no means am i a pro or anything. Just don't want to see anyone wipe out there account like that

So, sorry if i offended

 

[themadride]

3rd Trade

3rd TRADE: MCDONALDS (MCD)

No tip this time. Just thinking about recession resistant stocks. I was betting that MCD would come out with a good quarter and that everyone would be looking for a stock just like it to weather the storm. I made some BIG mistakes in this one.

Nov $57.50 Call MCD KY
- I bought in at $300.

This is where I screwed up big time. I was so determined to get a good entry price because the option had a big spread. I kept trying to enter a limit order for the bottom end and chased the stock from 2.10 all the way to 3.00. If I had just given up .10 at the start I would have saved a ton. It was REALLY REALLY STUPID.
I promptly fell as soon as I bought in. It went all the way down to where it started within an hour or two.

Later that day it rose to $350, but I was either too slow, too greedy, or simply misread what was going to happen....because it dropped from there for the next 3 days.

NOW! HERE IS ANOTHER HUGE PROBLEM! The option value kept fluctuating between $140 and $250. It would trade in that range each day. The problem was that I only had enough in my account to buy in again at $115. I had to wait until the 3rd day for it to drop that low. It bottomed at $110.

Nov $57.50 Call MCD KY
- I bought in at $115.

The next day the option went on a rocket ride all the way to $420. I sold at $330. I was in a little bit of a hurry because I had already been down so much.

- I sold 2 contracts at $330

After brokerage costs I had a net gain of $227.55

Note: Feeling both a little shaken and positive. I learned 2 valuable lessons for my trading strategy. 1) DONT CHASE. 2) MAKE SURE I HAVE ENOUGH LEFT TO BUY IN AGAIN LOWER.

 

[themadride]

Conversaton

I'm not saying i know everything and by no means am i a pro or anything. Just don't want to see anyone wipe out there account like that

So, sorry if i offended

I'm definitely not offended. The problem is that with only 400 in my account at the start it is kind of difficult to even find a trade that allows me to risk a small percent of my account value. In my particular scenario, I felt like I had no choice but to risk a lot at the start. Almost like buying into a big poker game.

I really don't mind the advice. I listen to it all...from everyone. I just hope everyone understands that I can't take everyone's advice. I've already taken for granted I will be making plenty of mistakes.

 

[themadride]

4th TRADE

4th TRADE: PFIZER (PFE)

My worst trade so far. Purely retarded. I had just bought in too high for MCD and I felt like the day was still going good, but that I had made a mistake with MCD. So, I decided to buy PFE. I think they had reported a decent quarter or something....but there was no real reason to trade PFE. But it gets worse too.

Nov $17.50 Call PFE KW
- I bought in at $94.
- Sold at $61.

When MCD started to drop fast...I decided I should take the loss in PFE and roll over the funds to buy back in lower in MCD. I completely forgot that the funds had to settle. So, not only did MCD not drop low enough for me to buy again for 3 days, but I also took a loss with PFE for no reason.

After brokerage costs I had a net loss of $44.20

Note: I felt better in a few days after MCD went back up. But I felt like a moron at that moment.

 

[themadride]

5th TRADE

5th TRADE: MCDONALDS (MCD)

I still felt like MCD was a good bet, so after a pull back I decided to trade it again with a call option of a higher strike price.

Nov $60.00 Call MCD KL
- I bought in at $135
- Sold at $185.

After brokerage costs I had a net gain of $38.80

Note: This was a pretty uneventful day. Not much movement or volume or anything. Felt like it was a nice little gain.

 

[themadride]

6th & 7th TRADE

6th & 7thTRADE: WMT

Still trying to play on the recession resistant stocks. Everything energy and financial just seems like a guessing game.

Nov $60.00 Call WMT KL
- I bought in at $122
- Sold at $1148

After brokerage costs I had a net gain of $14.80

NEXT MORNING AFTER PULL BACK

Nov $60.00 Call WMT KL
- I bought in at $88
- Bought again at $86
- Bought 2 at $79

- Sold 2 @ $90
- Sold 2 @ $98

After brokerage costs I had a net gain of $14.05

NOTE: Both of these days were break even days in the market and in the stock I was trading. I my opinion they were tough days to turn a profit and I felt pretty great that I had some modest gains on these days.

 

[themadride]

8th TRADE

8th TRADE: MCDONALDS (MCD)

Started hearing news about the new Blackberry being a huge hit. Verizon had a couple of days before it reported earnings. It also had a nice dividend, plans to buy Alltel, and some upward momentum. It actually might have been a bit risky because it had already gone up a bit. But I ran with it.

Nov $32.50 Call VZ KZ
- I bought in at $113
- Again at $93
- Again at $93
- Again 2 contracts at $95
- Again at $79

Ran as high as $2.24 at one point, but I decided to hold out...then it dropped. It really feels a lot like my earlier experience with MCD. HOWEVER...this time I didn't chase up the stock with a ridiculous opening bid. Also, I deposited another $300 into my account which helps a little.

FOLLOWING DAY (ELECTION DAY):

Nov $32.50 Call VZ KZ
- Bought again at $58

- SOLD 3 at $1.26
- SOLD 4 at $1.50

After brokerage costs I had a net gain of $303.30

NOTE: I was SO ANGRY this day. I had to go vote and so I couldn't watch the market in the morning. Had I watched I would have seen VZ KZ go as high as $170. At any rate, it was nice gain.

AFTER ABOUT 1 WEEK: My $700 is now worth $1288.08. I've had a realized net gain of 588.08. Net gain of %84. :clap:

 

[themadride]

9th TRADE

9th TRADE: GENERAL MOTORS (GM)

Going short on GM. The government decided not to bank roll their Chrysler merger. (Hurray Capitalism...Booo Socialism) However, it was the wrong call. For some reason the stock went up a tiny bit.

Nov $5.00 Put GM
- I bought in at $96.
- Sold at $84

After brokerage costs I had a net loss of $23.20

Note: I could have doubled my money if I had waited 3 or 4 days. But I took the loss because I couldn't figure out why it was still going up. I don't like to trade things I don't understand. In the end, they reported some HORRIFIC cash losses in the quarter and it finally brought the stock down. However, in the end socialism will win and our tax payers will have to pay the salaries of those employees and continue to support companies with CRAPPY cars to sell. So...I don't think I will touch this company again.

 

[Hotch]

One thing I'm not completely sure on. Did you ever actually risk 50%? Or did you just have 50% of your funds in the market, most definitions of risk are the loss you will take at your stop.

 

[themadride]

One thing I'm not completely sure on. Did you ever actually risk 50%? Or did you just have 50% of your funds in the market, most definitions of risk are the loss you will take at your stop.

The short answer is "both". In the particular instance I think you are talking about I didn't use any stops because I chose to buy another traunch at a lower level and dollar cost average my way into the position.

So, depending on how you look at it, it could certainly be said that I was risking 50% of my funds at that time.