I will review my afternoon paper trades from today (-.55) and my prop account trades from yesterday (-$133) sometime this weekend. I can’t catch a winning trade let alone a green day – paper or cash. So I thought I would focus on one little bright spot.

I had $500 in my Think or Swim account and a week ago, bought 100 shares of C at $.99. Over the weekend, I decided that I would take some small positions in other loser stocks, all at risk of being nationalized or going bankrupt or having reverse stock splits. My main criteria for buying was that they were cheap, which is a classic rookie mistake. I did a couple things right: 1) I bought them near their 52-week lows in a very oversold market; 2) I took very small positions (100 shares) and 3) Didn’t put all my money into one stock but nine of them (diversified).

Now, the $207 unrealized profits (when you take out commission) – I know is a result of the 700 point, four-day rally, something we have NOT seen for awhile. I got lucky.

My newbie theory was I could buy $415 worth of stocks that were worth $47,000 a year and half ago. It’s really stunning how far the market has dropped:

July ’07 Value 100 shares
ABK 0.38 $88 $8,800
AIG 0.365 $70 $7,000
C 0.99 $53 $5,300
FNM 0.36 $67 $6,700
FRE 0.36 $62 $6,200
GNW 0.83 $32 $3,200
GPP 0.38 $55 $5,500
SIRI 0.20 $3 $300
SRZ 0.28 $40 $4,000
$415 $4,700 $47,000

This week, after I bought them – we had the crazy bull bounce, including some weird spikes in some of these stocks. Like GPP rocketed up at close today; there is a possibility their debt will be restructured or something to that extent early next week – OR their bondholders could say not thanks and it could go into Chapter 11. Most likely, the stock will rise on the rumor and fall back to where it was after the news, not matter what it is.

In any case – it’s nice to share a screen shot with some green on it finally!

Who know how long will last. My rules for this portfolio are to 1) Hold on to these stocks as long as I can – unless I need the money because I’m unemployed; and 2) Unless in the middle of day I hear about catastrophic news, of course I can try to get out before things get halted. Now if any one of these stocks really recover, I will allow myself to use technical analysis to exit if the stock goes up to $20 but starts to falter – I will take my gains then but that is years away.

So what will be the outcome of this experiment? Well, I will probably learn what it feels like when a stock you own:

  • Becomes nationalized.
  • Goes bankrupt.
  • Has a reverse stock split.
  • Is halted in trading.
  • Gets delisted off a major index.

I have been thinking – is the point of trading to avoid these experiences under any circumstance? Or can I learn from them? Can you not really make money unless you put yourself at risk? I know that one of the reasons I paper traded was because I was completely scared of losing any money – but that’s part of trading (and mostly what I do right now – lose money!)

I’ve never owned a stock longer than a weekend. Now I have a portfolio full of stinker stocks that I’m going to hold long-term. This is what I think is going to happen. In a couple years –

  • Probably five of the stocks will no longer exist.
  • At least one will be trading for at least $10.
  • At least two will be trading for at least $3.

So I invested $500 and a couple years later I may have $1,600 – purely a guess, I know.

But I have some skin in the market now and am LEARNING to hold on to a stock for a longer than 10 minutes.

Maybe before I can become a day trader, I have to go through the stage of losing money trying to buy stocks cheap and hoping they will go higher.

I will update how things are going every now and then so you can laugh at me!