First trade ever

sommi · 1 February 2010

You should probably consider some economic fundamentals. Sustained demand from China is a big bet. Are you sure we are going to get the boom like we did in 2003-2004? Post-GFC, I wouldn't think so.

Honestly if I were you, Rio's price movement over the next 6 months is a big gamble. Rising interest rates in Australia would tell investors that 'we are okay to move along now' but I'm not so sure the rest of the world is convinced.

Have a think about it.

Julia · 1 February 2010

Mr J said:
The only suggestion seems to be to do some work before taking action. I'd suggest close the RIO trade though, because we should not be in a trade if we have no informed opinion.

Liar's Poker said:
After dropping approximately 14% in less than a month on your first trade, the worst thing you can do now is ignore your mistakes.

Good of you to interpret Liar's Poker's post, Mr J.
I'd still like to hear Liar's answer to my question about whether he is suggesting the OP should sell the shares at this stage.

Re your suggesting he close the trade on the basis that he has no informed opinion, you may be being a bit unfair. His earlier comments suggested he believed there would be strong ongoing demand from China, a view that probably few would disagree with.
He has a two year time frame.

If he sells now and crystallises the loss, how is he going to feel if the stock rallies in a month or so and goes well beyond his purchase price?

skc · 1 February 2010

Julia said:
If he sells now and crystallises the loss, how is he going to feel if the stock rallies in a month or so and goes well beyond his purchase price?

The exact opposite to how he's going to feel if the share fall another 20%! Surely this feeling is not the reason to buy, hold or sell?

Logic suggests there are only few options:
1. Do nothing
2. Sell and forget this ever happened
3. Hold for now, do some research, and make informed decision
4. Sell now, do some research, and make informed decision
5. Buy more

Just pick one...

So_Cynical · 1 February 2010

skc said:
Logic suggests there are only few options:
1. Do nothing
2. Sell and forget this ever happened
3. Hold for now, do some research, and make informed decision
4. Sell now, do some research, and make informed decision
5. Buy more

Just pick one...

5. Buy more

kgee · 2 February 2010

So_Cynical said:
5. Buy more

Is this discussion still about first ever trade?

Take the hit, step back and try and get a picture of what happenned.

Everyone gets it wrong sometimes, and people who try to sell advice are probably trying to sell themselves advice (me included)

so in that vain look for the opportunities but be cynical of anyone selling them to you
(did i just quote yoda???)lol

And yes it can be ruthless

Liar's Poker · 16 February 2010

Julia said:
Good of you to interpret Liar's Poker's post, Mr J.
I'd still like to hear Liar's answer to my question about whether he is suggesting the OP should sell the shares at this stage.

Re your suggesting he close the trade on the basis that he has no informed opinion, you may be being a bit unfair. His earlier comments suggested he believed there would be strong ongoing demand from China, a view that probably few would disagree with.
He has a two year time frame.

If he sells now and crystallises the loss, how is he going to feel if the stock rallies in a month or so and goes well beyond his purchase price?

Sorry for the late reply Julia, I have only just got my head above water at work again.

Mr J has interpreted my post correctly - I can see how it could have been misunderstood, my fault.

After paper trading for many years, I started trading in $1000 lots. After taking brokerage into account, I had to make 5% just to break even. It was a pointless amount really, but it let me get my feet wet without risking a large amount of capital. Even if I took a 20% hit, it was only $200. Granted, it was always annoying when I did well, as it barely covered my Saturday night out. I did this for years and the lessons I learnt from my mistakes have made me a far better trader today. I always found I was more diligent researching a mistake than I was with a success.

I did okay through those years. Even if I hadn’t, the losses could have been justified due to how much I had learnt and matured as a trader. I'm glad I didn’t stop after taking my first hit. Hence my first post (and its intention) to the original poster, of how important it is to learn from his/her mistakes and when comfortable, try again.

You only touch an electric fence once.

newbie trader · 16 February 2010

'Liar' your last post rings so true. I'm 18 and i recently bought a stock (my first trade) after about 3yrs of reading, watching and paper trading the market. The stock is somewhat down at the moment (somewhat being an understatement) and from a loss (even though i havnt exited my position) you learn so many things about all facets of the trading world (i.e why a stock rises and why it then falls). I just loved that post :.

N.T

Mr J · 17 February 2010

Julia said:
Re your suggesting he close the trade on the basis that he has no informed opinion, you may be being a bit unfair. His earlier comments suggested he believed there would be strong ongoing demand from China, a view that probably few would disagree with.
He has a two year time frame.

If he sells now and crystallises the loss, how is he going to feel if the stock rallies in a month or so and goes well beyond his purchase price?

How many people think resources in general are a good buy due to demand from China? Many, and it's not usually an informed opinion, it's recycled garbage from the media.

I do not think he has an informed opinion. When he first posted, he said he knew little about the markets, and bought it simply because he felt like buying some stock. He later suggests that he did have a bit of a plan, but is not sticking to it, and holding on convinced that the market will start listening to him. Just re-reading his posts, I think he has said all the wrong things.

I'm up to the part where he asks if he made a trading mistake, and Aussiest says no. I completely disagree, he's made a number of mistakes:

1. Unclear strategy.
2. Ignoring stop-loss.
3. Holding, convinced the market will show him to be right.
4. Ignoring original price.
5. No idea what to do ("the book says sell, what should I do" etc).

And that's only the ones I remembered to point out. He clearly isn't ready to have money in the market.

Yes, if he sells now it is a loss, but he can always re-enter. How would he feel if it rallies? It shouldn't matter, though it probably would.

Julia · 17 February 2010

Mr J said:
Yes, if he sells now it is a loss, but he can always re-enter. How would he feel if it rallies? It shouldn't matter, though it probably would.

I don't disagree with anything you've said.

It's reasonable (and easy) to criticise the OP for jumping in to Rio at $80 or whatever it was. But haven't you ever - when inexperienced in any field - moved without a clearly thought out plan?

I'm not one of them, but many people would regard RIO as a long term good investment, even at $80. They will decide they want to own shares in a given company and just buy them, with no understanding of price movements.

What I've quoted from your post above is essentially what I was getting at.
Only my own experience, but I've exited substantial, well run companies after a fall of X%, only to see them run up exponentially soon after.
I'm just attempting to make the case for a discretionary approach with a quality company, not disputing at all the need for disciplined money management.

Mr J · 17 February 2010

Julia said:
It's reasonable (and easy) to criticise the OP for jumping in to Rio at $80 or whatever it was. But haven't you ever - when inexperienced in any field - moved without a clearly thought out plan?

I'm not criticising the poster, but the overall approach.

Only my own experience, but I've exited substantial, well run companies after a fall of X%, only to see them run up exponentially soon after.

Are you wishing you held, and do you think it was the right action? Did you have a plan to re-enter? Did you make a mistake when calculating the exit? The stop loss is meant to be the point at which we're no longer willing to be in the trade. If we want to stay in, we want our reason to be the right one. If we stand by our reason to exit but the stock goes up, well that's part of the game.

Julia · 17 February 2010

Mr J said:
I'm not criticising the poster, but the overall approach.

I realise that. I was simply making a general comment.

Are you wishing you held, and do you think it was the right action? Did you have a plan to re-enter? Did you make a mistake when calculating the exit? The stop loss is meant to be the point at which we're no longer willing to be in the trade. If we want to stay in, we want our reason to be the right one. If we stand by our reason to exit but the stock goes up, well that's part of the game.

Oh dear, I'm not sure I can be bothered nitpicking the details.
We are probably coming from different viewpoints.
I'm talking about solid stocks which I'd intend to hold for more than a year, barring any radical fundamental change in the fortunes of the company.

LEI is a recent example. They reported a few days ago and the result, while very good, was slightly less than had been talked up by analysts, so the stock fell with a bang. Their forward outlook, however, is excellent.
So if I'd just been following the price action I'd have sold. But given the outlook for the company's near and future profits, and the quality of their management, I wouldn't sell.

So I didn't. And the stock has already recovered most of the loss.

So this is what I'm talking about when I question the automatic selling of a stock at a given price level.

You say

f we stand by our reason to exit but the stock goes up, well that's part of the game.

With respect, I think that's less than sensible as an irrevocable rule. You may feel vindicated about sticking to some plan, but it isn't always going to be what makes you the most money.

Mr J · 18 February 2010

Julia said:
With respect, I think that's less than sensible as an irrevocable rule. You may feel vindicated about sticking to some plan, but it isn't always going to be what makes you the most money.

This isn't about sticking to a plan, it's about second guessing a trade based on hindsight. If price shoots up after I exit and I know I couldn't have taken advantage of it, I don't let it worry me. We can't capture every move, and missing one doesn't make our exit bad.

By the way, if you decide to hold on past your original stop, what is the point of that stop, and why was it placed there and not further?

rabbit59 · 18 February 2010

Mr J said:
This isn't about sticking to a plan, it's about second guessing a trade based on hindsight. If price shoots up after I exit and I know I couldn't have taken advantage of it, I don't let it worry me. We can't capture every move, and missing one doesn't make our exit bad.

By the way, if you decide to hold on past your original stop, what is the point of that stop, and why was it placed there and not further?

Correct, completely agreed Mr J, its about being able to say - 'I believe this is the best possible scenario and the best buy/sell available to me, that i am willing to get' its about backing yourself, you have to become (if this is a word) UN-emotionally attached, and be able to look beyond your feelings towards that stock or option, and LOGICALLY/INTELLIGENTLY make a decision based on facts....

very hard to explain but many people will be able to explain alot better than I

only put in what you can afford to lose.... tread carefully...

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