Simulated Stock Pick Results: Take Two

Just like last week, I only watched one video lecture thanks to the basement apartment work. I’m up to Lecture 14 in “How The Stock Market Works”. It seems as though DeGenarro’s technical explanations are over so, when I have more time, I’ll do my own technical explanations on this blog. I want to dissect and define all the things I see when I look at a corporate balance sheet or a stock quote. The terms they use can be confusing, so I’d like to put my own definitions that would make it easy for me to understand.

July 14th

General Electric (GE)
300 shares bought at $26.83
300 shares sold nine days later (July 23rd) at $25.88
Net Profit: -$285

Comments: I took a beating with this stock. I should have sold it Monday morning, a night after writing the post about how I hate holding a long position. Had I sold at that point, I would have only lost $111. I kept the faith, which is great for religion but bad for stock trading. During the time I held onto GE, I could have sold it and went for 2 stocks I knew was going up. On Tuesday, GLF stock went from 40.98 to 42.41. EGHT stock went from 7.36 to 7.59. AOS stock was a monster, going from 46.98 to 50.63. These were all stocks I had my eyes on for Tuesday buys, but I decided to stick it out with a loser for another 3 days with no reasoning. Ugh! So I don’t plan on doing anymore long positions for the rest of the year, even when I start trading with my real money. Besides not selling earlier when I was up, the biggest lesson I learned was the importance of finding a low point. I noticed that, the minute I bought the GE stock last week Monday, the stock went down. I didn’t do my due diligence and ended up buying at a high point. The best way for me to find the low point is to look at the stock price over the last month. If the stock can get to that low point or near it, I can buy the stock before the earnings report and make a higher profit.

July 24th

Xerox Corporation (XRX)
600 shares bought at $12.79
600 shares sold the next day at $13.09 (currently trading at $13.15)
Net Profit: $180

Comments: This practically made my day on Friday, when I was so miserable and tired from the basement apartment work and the GE trade. After selling the GE stock I decided to look at companies that would be holding earnings reports on Friday. The website “Motley Fool” had a great article about how Xerox would go up. The article convinced me and I bought 600 shares. Turned out to be a good deal.

July 24th

West Bancorporation (WTBA)
123 shares bought at $14.62
25 shares bought an hour later at $14.36
148 (all) shares sold the next day at $14.55 (currently trading at $14.57)
Net Profit: -$3.86

Comments: This was an attempt to test out a theory that came about with the GE stock trade. Right after I bought WTBA, the stock dropped by 26 cents. So I decided to use the rest of the money in my account to buy 25 shares at the lower price. The little profit I made offset what would have been a bigger loss had I put all the money in at $14.62. I started to wonder whether it’s a good idea to buy stocks this way. Say I want to buy 500 shares of a company. What if I bought 250 stocks at one price, and then waited to see if the stock went down to buy the other 250 shares at the lower price? My losses wouldn’t be as bad, and my gains would be better. The only problem with this plan is the transaction fees that have to be paid every time I do a trade. By doing to trades, I have to pay twice the transaction fees. So before I test this theory out again, I have to make sure it’s worth the risk. Still, a good learning experience.

I think it’s important to note that I haven’t been doing limit orders. I’m still very new to this, and I feel that limit orders won’t help me in my current stage of learning. It’s great when I get to the level where I have a good estimate of how high a stock will go before I sell or how low a stock will go before I buy, but I have yet to reach that level. Market orders keep my eye on that stock price and allow me to better generate theories of how high a stock can go based on news and information. Limit orders are great for when I know what I’m doing, but now’s not that time.