Limit your risk to what you can afford to lose

When I first joined a well known stock picker’s group I had about 20K seed money to invest. While I am an experienced Mid-Cap Corporate COO, Private business owner, and have many excellent long term investments, a large 401-K, paid-off home, etc. and keep 100K in a GNMA account for emergency cash, I found I did not know squat about day-trading.  Newbie was even a term too good for me.  Background marginally counts.

In my case it helped me act before thinking! I acted on hype on the treads ..not fact. I got lucky with a few picks early. Built the 20K to 40K, then within a week dropped 28K waiting for divine intervention on stocks that had hit their highs. Sure they’d come back just like my 401-K, and annuities, all long term investments. Newbie mentality. Divine intervention does not happen in day-trading!!!!

I tend to learn quick when money is taken from me…first thing I learned is that I knew nothing, absolutely nothing, about day-trading. I went out and bought some books mentioned on the SI thread. I also listened to his advise to learn one stock. Picked CMGI as was a suggestion.  I made small 100 – 200 share trades in the $60’s and $70’s. Learned the daily pattern of the stock. Made money playing the trends. If the stock was going the wrong way, I sold and took my loss happily and immediately. I was successful about 4 of every 6 trades with this stock. Trading CMGI, I got my seed money to $61K. I went to their stockholders meeting on Dec. 17, only 25 miles from my house. I listened to management, read their eyes, checked their pulse….but, checked the charts, the news, and did DD up the gazoo!

To make long story short, I bought 500 CMGI at 98. Sold at 134. Bought it back at 111 sold at 115 last Friday morning. Bought at 106+ last Friday at the close of the market. Sold at 131 at market open on Wednesday. Bought it back at 128  5 minutes later. Sold at 206 Friday PM. TOOK THE PROFIT!

I also bought and day-traded this stock in 100 and 200 lots for anywhere from +2 to +10. Also, unlike perfect traders, I bought it sometimes going the wrong way. If the trend was bad, I sold it immediately and took a small loss — planned reentry. I have learned not to watch the ticker and go blind. On Friday, I thought I had the trend. Bought 200 at 198. Stock started down, I put in a conservative stop loss.. no problem. I made a new pot of coffee and took a walk. I came back to screen 15 minutes later and sold at 205!

I added up my gains and losses this weekend on the last 3 months of trading.  $117,00.

I went all cash this weekend — learned unabomber lesson on ASTM, GERN and a few others. Doing my DD for Monday – don’t mind missing a gap. I will buy on the pullback if I feel the stock is a good day trade.

I have plenty to learn, and I mean PLENTY! But newbees need to listen to sound advise. IRC has been great.. but, hype is a killer. newbees like me need to learn who is giving good info, hyping or P&D type. I am getting a better feel on this. Also, I’m doing better on other trades, but I still need to get Level II. I will get it this week. Having been to the pulse, I am now much more cautious of my day and position trades than when I started.

Anyway thanks. My wife now understands why I like a 10 second commute to my home office versus a one hour commute to the office and the corporate BS. At 48, I may need to return to it, but not for now.

Please continue to encourage newbees to go slow, paper trade, pick a stock to follow, learn DD, don’t listen to every hype on the web or IRC. You can make money; 4 out of 5 days a week is my goal.

Thanks again,
John C