I bought my first stock (GM at a low of $5) in mid-October 2008 and when the bell opened the next Monday, the Dow jumped the highest it ever had in one day. I made almost $500 in one weekend. I thought, this is easy!
Since then, I’ve made some 20 trades (thank god for a month of free ones at TD-Ameritrade or I would really have a dent into my capital). I’ve had some successes with a TMA spike and buying F below $2 and selling higher, but now am 10% in the hole of my initial stake, especially after some bad decisions the end of this week. Kinda of a bummer as just five days ago I was 4% in the green.
One of my biggest problems is I’m a qualitative kind of person rather than numbers oriented (I write grant proposals for a living, and teach social work as an adjunct professor). I’m really struggling with understanding the heavy quantitative aspects of stock charts, etc.
The Pattern Day Trader rule has really impacted some of my trades – my two biggest losses I held over night to not use up my three round trips a week and/or to avoid a fourth day trade, which would of triggered a PDT hold on my account. Recently, I opened up several additional accounts to try to counter that, but decided that wasn’t a good idea for now. Given my STEEP learning curve, not wanting to lose anymore $ while teaching myself, and the realities of a small account and the PDT rule, I’ve decided to take out most of my money in the accounts and do the following:
1) Not think about trading at all for a couple weeks or more beyond reading the business section in the newspaper.
2) After a fresh start, open three paper trading accounts: one with $30K for day trading, the other with $10K for swing trading and a last $10k virtual account for value/long-term investing.
3) Practice two main types of trading, specifically:
a) A momentum day ranging style looking at price drops after high of the day, 10/60 crosses, only making small trades of about $3K with a $30K account, etc. I will largely borrow from Muddy’s model from Green on the Screen mixing in some shorting of penny stocks via Tim Sykes’s approach.
b) Swing Trading keeping stocks a couple days trying to buy in pullbacks within an overall upward trend using a $10K account. These tactics I plan to base this in part on what Trader Mike describes as what he did before becoming a day trader. Also, I’m curious if it’s possible to flip stocks under .50 cents that move within a consistent range every couple days by buying low and selling on the high side.
4) My plan is to simulate building the $10K portfolio (which is the amount I have to invest) to the point where it is big enough to do day trading with a $25K account. I’m curious if the swing trading and momentum strategies can work with practice.
In the end, I would like to be able to swing / day trade part-time as a way to build capital while keeping my consulting business for income. Fortunately, I work for myself and can get away with spending the mornings through lunch doing this several days a week, as long as I get my writing down in the afternoons (which I haven’t been as disciplined doing lately)….
I have a feeling now about the psychology of TRADING real money…its intense. So to hope put some pressure on myself, I’m going to use this blog to track my results, so hopefully it will simulate some of the emotional pressure that I know that trading with paper money takes away – if I publicly post my outcomes I will have some emotional attachment to what that says and means – thus giving it value, though not the same as hard cash.
