|I will never forget the first trade I ever made. It was March 7th '05 and I was exploding with excitement that my $2,000 had just become available in my newly opened Scottrade account. I saw dollar $igns everywhere I looked and was absorbing information about the market like a sponge. After reading a few books, scanning every page of Investopedia.com and asking some experienced investors for some hot stock tips, I was anxious to pull the trigger. That morning I was up at 6 am ready to dive into the market full steam ahead.|
Through fundamental and technical analysis I determined that INTC was the symbol that would transform me from a boy in West Hills, into a Wall Street hot shot. I remember spending extra time analyzing Intel because if the first stock I bought didn't go up, my investing career would be doomed from the beginning. I knew that I needed to be diversified, so I allocated 25% of my portfolio to the trade and waited for the perfect entry point.
Symbol "INTC" | Market Side "Buy" | Quantity "20" | Type "Market Order"
I patiently anxiously with my mouse pointer on the "Send Order" button. My heart was pounding out of my chest, this is it, I think INTC is about to break out...
AHH popup windown...
You've entered a Market Order to Buy 20 shares of INTC. Is this correct?
10:25:36 You bought 20 shares of INTC at $25.36
I remember just watching the chart all day. INTC's price didn't fluctuate as much as some of the other stocks on my list but I didn't care. I felt like this was the first day of the rest of my life.
The next day I bought TIVO and NAPS(Napster), both super exciting, but nothing like my first trade. It wasn't for about 6 months that I learned the exciting heart pounding excitement I was getting from trading was the primary reason most investors lose their shirts in the stock market. When trading stocks, "You must control your emotions, never let your emotions control you".
After following INTC for the next couple days, I realized that the homework I had done about analyzing the fundamental and technicals of individual stocks was no help for the awkward situation I found myself in. After two days the stock had fluctuated no more than $1 up and down which amounted to only a $20 fluctuation in my portfolio. When you calculated in the fact that I was paying $7 a trade, if INTC was up a full $1 that would ammount to me making a whopping $6! I calculated that in order for me to make $100 off this trade INTC wold need to go over $30! That could take a year at this rate! (INTC still hasn't hit $30 in the last 3 years)
I ended up selling INTC just four days later at an $18 loss. I didn't care because I had learned what I believed to be some valuable lessons:
1) If I wanted to get rich, I needed to buy cheap stocks. If the stock price is low, I can buy way more shares!
2) Figure out how much you want to make off a trade first, then find a stock that will get you there.
That first rule helped me lose about $2,500 my first 18 months of trading. The second rule turned out to be a good one that I still use today.