One of the most common tactics the emotion of greed uses in the world of trading/investing is seduction. The greed voices begin whispering into your ear and causing you to fantasize about all sorts of big/quick money dreams… and then you’re sitting in a spot regretting your actions. Our guest from the chat room community DJ shares his experience with this. As you will hear, he had a very logical longer term strategy that was working and his account was growing, but then the biotech stock voices appeared. This lead to some lessons to be learned for DJ; however, you as a listener can learn from them without having to go through them!
Notes:
DJ got interested in the market a few years ago while he was in school. He would see Mad Money on the television and started to track gainers and losers. DJ was wise enough to avoid forums and message boards to find his trades.
Even though he had a small account, DJ focused on pharma stocks which are extremely volatile and this was reflected in his profit and loss with big swings up and down.
DJ started to contribute to his trading account over a year and a half and now had over $25,000 dollars to trade with. Most of this money was going into ‘safer’ long term investments but he strayed from the path and put a portion into the pharma stocks which led to a huge unrealized loser which he luckily recovered from.
After joining the community, DJ joined CTU and decided to focus on options. He wanted to utilize his knowledge of charts and risk with the leverage associated for options. He liked that he could use a small amount of capital to trade larger names.
Since DJ works full time, he finds it is easier to swing trade but he does have aspirations to eventually day trade in the future. He likes to try to learn the personalities of stocks for maybe a month generally before he puts on any trades.
He now also believes in the powers of numbers. DJ understands that is a numbers game and that he will not make money on every trade he puts on. Now he simply takes his losers and looks for the next opportunity.
Quotes:
“I would just jump on one of those gainers or losers if I thought it would bounce but I was totally guessing.”
“A lot was going into AAPL and GOOGL but I went totally crazy and put lots into CARA. That was my wake up call.”
“Being able to put in 500 dollars and make a few hundred percent profit was very appealing. It is good leverage.”
“If you look at the same ticker it tends to do the same thing over and over.”
“Keep those losses smaller, doesn’t hurt as much and know that you went in with a good play.”
“Go learn something. Find some method and learn it and use it. Don’t just throw your money in and wait for good news.”
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