First Trade

In the last post I had mentioned about my first trade, and the losses I made in it. As it turned out, those were just paper losses, and I actually got to close the trade at a profit.

Whatever, in the end, I just got out capturing a panic-moment in the market when the stock went down from -4% to -7% in a few minutes. The best thing about the current market is that everyone is scared, and it takes only a few moments for a stock to fall down. The best policy during these volatile market should be to capture the intra-day volatility.

Still, the lesson is learnt from the trade. Next time, would be a little more careful before shorting a stock. It was a lucky escape for me, and I would be doing more home work from now onwards.

First Trading Lessons

As I write this, there is a major turmoil developing in the world markets. Bear Sterns is already down the dump, being almost acquired by JPMC for as little as USD 240 MM. Lehman has had a bumpy ride on the last two days. Yesterday, it was down by more than 40% at one point in time, and today, its up by 35% on the back of positive returns.

Anyways, as people debate over the future of the financial firms, and these wall street barons, I have put on my first real trade. I am short on ABCD stock and have hedged that by being long on the index. ABCD was down yesterday, and I had made a small profit yesterday. However, today, it went up and up, and I have more than 4% loss for the day. I would wind up this position at 5% loss.

First learning from the trading:

1. Never short a stock which is backed by a strong promoter having large holdings. The promoter can stand at a price, and even when the whole market is falling, the stock may just stand at one price.