Clear Trades

Another dumb buy, taking my losses on this one before it gets worse. I bought my 200 shares at an average price of 10.99 per share.

Realized a loss of -$372.02, for a return of -16.87%.

GE, Losses, Sell

Cutting more losses here. I bought my 200 shares at an average price of 21.35.

Realized a loss of -$554.03, for a return of -12.94%.

Losses, SSO, Sell

I finally took my losses on this one and let it go. I should have cut the cord much sooner, but I kept hanging on.

I bought 250 shares of AA (Alcoa) on Feb 2, 2008 at 7.8775 per share. I’m sure I could hold this for a while and see a better recovery—obviously I’m not a fan of selling at what may very well prove to be the market bottom, but I wanted to buy UYG instead and I expect to see enough gains with that to make up for this loss.

Realized a loss of $470.90, for a return of -23.83%.

Update: On February 25th, I received a dividend of $42.50 for my Alcoa shares. This changes my loss on the stock to $428.40, for a return of -21.68%.

AA, Losses, Sell

I’m currently reading Come Into My Trading Room: A Complete Guide to Trading, by Alexander Elder. So far I love the book, but it’s too early for a definite recommendation.

Just a few pages into the book, there is an excellent piece on trading that really got me thinking about my recent experience. This section is in the context of talking about men and women as traders and what the differences tend to be.

A guy studies his charts, decides to buy, and now his self-esteem is involved—he has to be right! If the market goes his way, he waits to be proven even more right—bigger is better. If the market goes against him, he is tough enough to stand the pain and waits for the market to reverse and prove him right—while it grinds down his account.

This immediately made me think of my recent trades in Bank of America. Only a few days after I bought BAC I was looking at an impressive gain, up more than 30%. As the stock was rising, I was thinking just like the above quote said I would. The gains I had were nice, but I started thinking about how great they could be and what I would do if I was able to sell at this level or that level. I was feeling validated, like I was the brilliant investor who saw an opportunity and grabbed it. I think I got all the more caught up in it because BAC fell for the first two days after I owned it, by the way, demonstrating the other problem outlined in the quote—taking the pain and waiting.

In the end, I missed out on a lot of gains in BAC, though I still came out of it with a decent trade. The stock topped 7.00 shortly after I bought it at an average price of 5.15. I ended up selling at 5.77. I easily left $600 – $800 on the table, ending up with a gain of $480. This is on a $3,500 position. Remember, I’m not complaining—I’m just trying to learn from every trade I make.

I recall thinking to myself that I should set a stop-loss order at 6.15, this was when the stock was in the upper 6s. 6.15 was an arbitrary point, but it would have been better than not having a stop-loss at all proved to be. I want to be sure to use stop-loss orders in the future to prevent any winning trades from becoming losers. I haven’t made a specific rule yet, but I’m thinking that once I’ve topped a 5% or 10% gain I should set a stop-loss no matter what.

The lesson learned is that I have far too much emotional involvement in my trading and I need to work to become much more rational and disciplined. I like to think that I do a good job of removing emotion from my decision making, and while that may be true on a relative basis, I clearly have a long way to go to become a disciplined trader.

Books, Lessons Learned

Bought 100 shares of SSO in After-Hours trading at 19.92 per share.

I guess you could say I’m averaging down here. I think the short-term trend still feels relatively bad, but I really don’t think we are going to go much lower. I think SSO under 20 is a good opportunity for decent gains over the next couple of weeks.

This brings my current long position in SSO to 200 shares at an average price of 21.35.

Buy, SSO

I’m going long GE (General Electric) for the dividend and for a short term trade. Like most things today, I think the drop is an over-reaction and I expect to see this come back soon. The dividend yield isn’t bad either…assuming they pay it of course.

Buy, GE

I bought another 750 shares of UYG (Ultra Financials ProShares) at 2.61 this morning.

I still want to reduce my exposure to the Financial Sector, but the selloff this morning didn’t make any sense to me so I thought it would be a chance to lower my cost basis on the UYG. I don’t want to be in this for long and I’m hoping to trade out of it soon.

This purchase gives me a total of 950 shares of UYG at an average price per share of 2.71.

Buy, UYG

Overall, I think I’m betting far too heavily in one sector (Financials) and I’m too anxious to buy. I think I have the fast run-up in the Financials from the prior week stuck in the back of my mind and I feel like I need to jump in when the prices dip. So far this week, that has been a bad idea as the prices just move lower each day.

Compounding the problem with overweighting in one sector, that sector happens to be at the mercy of the news (or lack thereof) coming from our Government. That is a very frightening place to be and I don’t think I’m going to speculate in such a volatile area again. At the very least, I think that buy-the-rumor and sell-the-news is the only way you can get close to this sector right now.

I also don’t feel good about keeping these positions for so long, but I guess I feel like the downside risk can’t be that much greater at this point and any piece of good news will send these stocks much higher. I may be kidding myself and I may come to regret this decision later, but this is where I’m at now and only time will tell how it plays out.

Lessons Learned

My Weekly Realized Returns Report is a way for me to check my progress and see how I’m doing in terms of real dollars. After all, those are the ones that count!

For the week of Feb 9 – 13 I had a realized gain of $437.97. This gain was a result of my BAC trade.

This brings my all-time (since January 28, 2009) realized gain to $252.64.

For purposes of this report, realized means the actual net dollars of closed positions, after commissions have been subtracted.

Weekly Report

I sold my total long position in BAC at 5.77.

I went long BAC (Bank of America) on Feb 4th, buying 500 shares at 5.20 and later in the day 200 shares at 4.90.

Of course it would have been great if I had sold on Friday or Monday when the stock was trading in the high 6s and even touched the low 7s. I guess maybe I got greedy, or maybe I didn’t have a good plan going in, or maybe I bet too much on the bank bailout speech on Tuesday. I probably messed up on all 3 of those points. In the future, I’m going to be more careful to put in stop loss orders when I’ve seen such a large gain.

I’ve been growing more uncomfortable with my large Financial Sector exposure, and since I have a profit in BAC I decided it was time to sell.

Realized a gain of $437.97, for a return of 12.19%.

BAC, Gains, Sell