I did hit a homerun on my long term shares of AMZN, and that's all good. But I f'ed up on a "little" trade today.
I f’ed up big time today. Not so much in terms of dollars, but in terms of stupidity. I’ve actually been taking it easy, just a trade here and there because – there’s been no need, the market has been so good to me past several days, just watching my long terms go up. I even added another 1000 sh of AMZN long a couple days ago and those have been up up UPPITY immensely too. But today when AMZN took off, I decided to short a few shares, not because I figured that it was going to plummet drastically, but just because it was simply going too far, too fast and a drop seemed inevitable. So I decided to short a few shares, as a sort of hedge against a drop.
When holding shares long, this is called going “short against the box,” and because any short against the box must be covered before selling any long shares, in case I decided to sell those 1000 extra sh of AMZN, I didn’t want to go knee deep into a short and get locked into something crazy, so I did the short with just a paltry 100 shares, mostly just for fun and to clip a few bucks, and as a hedge in case AMZN really started dropping.
The first short I went at 2372 and covered almost immediately for 2370, because it started to take off and it looked iffy. No biggie, made a couple hundred bucks, just for fun, and to test the waters.
Then I shorted 100 sh again, at 2375 which I noticed that my stock tracker was showing the high of the day at 2379, but my other stock account seemed to indicate this as an error, and that 2374 was the prior top for the day, so 2375 seemed fine for either a hedge, or at least a scalp in case it looked iffy. So I filled at 2375 but when it seemed like it might run against me again, I entered the buy/cover immediately for 2373, but the stock JUST TOOK OFF and before you knew it was in the 2380s. So then I shorted another 100 shares at 2390, and entered the cover for the entire 200 short against the box at 2382, which 2382 would have represented a “get the hell out” cover at a small profit, but, would you believe it, it took off again, to pushing 2400.
All this time, my long term shares, which I have considerable shares, plus the extra 1000, were rocketing up, but I’ve held the long terms for a long time so I didn’t really care about them I was concentrating on this dinky little trade – which, this dinky little trade was now putting me in the hole thousands of dollars, just like that.
AMZN started to fall, but, would you believe it, fell to only 2383, just shy of my cover, and took off again, this time all the way to 2400! and beyond.
That just seemed crazee to me, so I shorted ANOTHER 100 shares at 2408, and entered an immediate BTC for the entire 300 sh short at 2390.5, just to get the hell out of the trade at a small profit, but the stock just flew again, and finally I bailed and covered, at market, 2427, for a SOLID ten K loss.
After THAT I noticed that it dropped a little but JUST KEPT GOING to the 2450s, so I didn’t really dwell on it then. Losing ten grand wasn’t the end of the world, and if I had held on, I would have been down a lot more. If the story had ended there, I wouldn’t even necessarily have had much to say, or dwell on. I certainly wouldn’t have gotten upset.
My strategy, which has worked for years, is to just average in more shares whenever a trade goes against me. This has ALWAYS worked for me, but today, it seemed like it did not.
I went back to work, regular work for some clients, and an hour or so later, I glanced at the tracker, and to my surprise, and chagrin, the damn thing was tanking! all the way down to 2300, and then 2290, then all the way down to the 2250s or so.
Can you imagine how p’ssed I was to see the stock drop below my original cover? Realizing that by simply doing nothing but waiting I coulda made a few hunny and gotten the hell out of the trade, versus losing ten grand? Do you know now why MDawg doesn’t end up behind again at the tables once he comes back from a loss? Is anything more distasteful than losing when you could have won?
And THAT’S why I say that I f’ed up…because if I had just turned off the computer and forgot about it, and let my original BTC in at 2290.5 stand, I would have gotten out of the trade fine and not lost a nickel, let alone ten grand – I actually would have made a couple hunny.
But – it gets worse – at that point I was going to slam a bigger order in, for another extra 1000 shares long in the 2250s, but the AMZNing stock took off so fast, it was 2280s again before I could think. Plus I started to calm down thinking, okay, okay, so you lost ten grand, your long term shares and the other 1000 make that ten grand seem like peanuts. But still, I kept watching the stock yo yo occasionally all day. And so it went all day. I did no more trades – just that one losing one. I didn’t sell any (long sh of) AMZN today either. I didn’t really pay too much attention to the stock after that moment when I realized that I could have recouped all I lost and then some with a long trade from 2250, but there were more than a few additional occasions when I could have gone long, or short, and EASILY recouped that ten grand, and then some, without even trying. But, usually, when I get smoked like that – especially given that I haven’t had a losing trade in over two years – and especially when I lost when I could have won by just holding on another hour (admittedly, through a period when the loss would have been as high as twenty grand, which is a LOT for a little 300 share order) – and especially as well, when I passed up more than a few opp’s to recoup the lost money and then some with a REAL trade (1000 share lots), usually, after an experience like that, a trader is a little apprehensive about jumping right back in with another trade, especially as we get closer to the bell, which decreases the success probability of the day trade as less time is left on the clock.
It was only ten grand, but still, losing ANYthing hurts MDawg when he’s so used to winning every time. Especially when he should have won on this trade – as his expected numbers were right to begin with.
You’d have to be a stock trader to follow all of the above minutely, but basically, I f’ed up, BADLY, and MDawg doesn’t f. up often.
The bottom line, summary of all the wall of text above: is that my instincts were right on, but in this case, I succumbed to “short fear” and pulled the trigger to get the hell out at a loss, when if I had just rode it out a bit longer, I would have done fine. I actually could have made over ten grand, instead of losing ten, but at a minimum, sticking to my guns of the original orders, I would have lost nothing at all, and made a little.
Psychologically though, it’s hard to short and forget – you just feel like you need to keep an eye on it.
Just goes to prove that in stocks, as at the tables, it’s YOUR choice whether to leave a winner or a loser, as there will almost inevitably be a period of time when you are ahead, and another period when you are behind. I have not seen ANY exceptions to this rule. Even the time that I lost money over two years ago on a trade, it was ALSO a frickin’ short against the box (also AMZN) and if I had simply held that trade overnight, I would have made far more than I lost.
Reply With Quote
