So obviously I went through a couple bad months of trading. Hopefully the experience can yield lessons I can learn from.
Airline/Oil Relationship is Over
Since October of last year all the way into April of 2015, there has been a great relationship between the airline and oil stocks. When oil was down, airlines went up. When oil was up, airlines went down. It was easy and I made some good money off it this. But that ended after the Q4 earnings report showed that the stronger dollar was a bigger hit on profits than expected. People are very fickle, investors especially. The big thing last year was the oil drop, so everyone focused on oil and its relation to stocks for a good while. Now it’s the strength of the dollar. I have to recognize these trends sooner so that I can jump on the next bandwagon. I got rid of all my airline stocks except for JetBlue. They don’t seem to follow the trends and are seriously undervalued by at least $5.
The Losers
I have to recognize the losers from the winners. Groupon and Walmart, for example, are losers. After their respective earnings reports came out, their stocks dropped and continue to drop. The 6-month chart shows a massive decrease of investor confidence, especially with Groupon. Yet I still invested in Groupon, even though I knew they are in big trouble and have a very vague and uninspired turnaround plan. I shouldn’t have made any GRPN trades after May 5th’s disastrous earnings report, but I kept hope in the pattern. Trusting in a pattern is fine as long as the company is strong. But seriously, who uses Groupon anymore with so much competition around them? They’re like the Blackberrys of the discount world: they started off with everyone wanting their product. Then others came out with better ways to save and Groupon took too long to adapt/compete. I have to combine my pattern research with investor reactions and company forecast if I want to start picking winners. Note: SDRL also has a losing trend, but I’m keeping them on my watchlist. They still have a pattern I can use.
Too Many Trades
This was the easiest lesson to learn. After April and May, I realized that I was simply making far too many trades. Not only that, but I don’t hold the trades of strong companies long enough. Look at TSLA that I bought in April. Disney. The key is to have a holding period and stick to it. This is a lesson I was supposed to learn in January when I bought TSLA and sold it a day too soon. I was impatient then. But I’m learning how to take my time, and that started in June. Even though I lost over $200, I only made four trades, and the last one (MUX) was a 10 day hold that made me $140. Every month should be 3 or 4 trades TOPS, especially those months in which earnings aren't reported.
Using Alerts
I don’t like Scottrade and plan to go with another broker when I start trading again next year. Their website tools suck and aren’t helpful at all. But one thing I do like are the “Alerts”. Alerts allow me to be notified when a stock hits a certain number. This allows me to plan ahead so that, when I get the email stating that a stock hit a certain number, I can assess the situation and determine whether it’s a buy. It also can help with a stock I own. Let’s say I buy ABC stock at $10. I can set multiple alerts combined with my stop that will let me know which way the stock is going. This means I don’t have to have my eyes glued to the Yahoo Financial app every 5 minutes like before. While not 100% reliable, they definitely make trading easier.
And that was June. It all comes down to this final month, and hopefully I can use these lessons to post a final win to what has been a crappy first round of trading.
Airline/Oil Relationship is Over
Since October of last year all the way into April of 2015, there has been a great relationship between the airline and oil stocks. When oil was down, airlines went up. When oil was up, airlines went down. It was easy and I made some good money off it this. But that ended after the Q4 earnings report showed that the stronger dollar was a bigger hit on profits than expected. People are very fickle, investors especially. The big thing last year was the oil drop, so everyone focused on oil and its relation to stocks for a good while. Now it’s the strength of the dollar. I have to recognize these trends sooner so that I can jump on the next bandwagon. I got rid of all my airline stocks except for JetBlue. They don’t seem to follow the trends and are seriously undervalued by at least $5.
The Losers
I have to recognize the losers from the winners. Groupon and Walmart, for example, are losers. After their respective earnings reports came out, their stocks dropped and continue to drop. The 6-month chart shows a massive decrease of investor confidence, especially with Groupon. Yet I still invested in Groupon, even though I knew they are in big trouble and have a very vague and uninspired turnaround plan. I shouldn’t have made any GRPN trades after May 5th’s disastrous earnings report, but I kept hope in the pattern. Trusting in a pattern is fine as long as the company is strong. But seriously, who uses Groupon anymore with so much competition around them? They’re like the Blackberrys of the discount world: they started off with everyone wanting their product. Then others came out with better ways to save and Groupon took too long to adapt/compete. I have to combine my pattern research with investor reactions and company forecast if I want to start picking winners. Note: SDRL also has a losing trend, but I’m keeping them on my watchlist. They still have a pattern I can use.
Too Many Trades
This was the easiest lesson to learn. After April and May, I realized that I was simply making far too many trades. Not only that, but I don’t hold the trades of strong companies long enough. Look at TSLA that I bought in April. Disney. The key is to have a holding period and stick to it. This is a lesson I was supposed to learn in January when I bought TSLA and sold it a day too soon. I was impatient then. But I’m learning how to take my time, and that started in June. Even though I lost over $200, I only made four trades, and the last one (MUX) was a 10 day hold that made me $140. Every month should be 3 or 4 trades TOPS, especially those months in which earnings aren't reported.
Using Alerts
I don’t like Scottrade and plan to go with another broker when I start trading again next year. Their website tools suck and aren’t helpful at all. But one thing I do like are the “Alerts”. Alerts allow me to be notified when a stock hits a certain number. This allows me to plan ahead so that, when I get the email stating that a stock hit a certain number, I can assess the situation and determine whether it’s a buy. It also can help with a stock I own. Let’s say I buy ABC stock at $10. I can set multiple alerts combined with my stop that will let me know which way the stock is going. This means I don’t have to have my eyes glued to the Yahoo Financial app every 5 minutes like before. While not 100% reliable, they definitely make trading easier.
And that was June. It all comes down to this final month, and hopefully I can use these lessons to post a final win to what has been a crappy first round of trading.
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