Monday, October 09, 2006

Churn and you will Burn

Last week, my trading was going so well, and then today it's like I had a relapse or something. When today's trading was over, my first thought was, ".... crap, now how am I going to explain this to my journal today??"
Explain what? Well, I turned over my whole portfolio today.

First mistake was that I sold INAP:
I sold INAP @16.92 in morning. The reason I sold INAP was because I was watching a couple other stocks and had the urge to chase. Since INAP did not break any support levels, there was no technical reason to sell it. This was a silly mistake, and can't be hidden away.

I also sold STEC@9.04, AKAM@50.87, HGSI@12.86, and RNWK@11.06. RNWK was a clear shakeout, so there was a valid rationale for selling it. AKAM looks like it is now going to test the support level @50, so that was a good time to exit until the dust settles.
In the case of STEC, my stop was set too tight, as STEC rallied back above my exit point and stayed rather bullish for the rest of the day. It was another case of gunning for stops, what can you do? I won't beat myself up over that trade, and will probably look for another setup to get back in tomorrow.
HGSI however, I sold and then bought back@12.98. Selling and then turning around and buying back the same stock is a good indicator that a mistake was made somewhere along the line. This was a simple case of fear and greed. Fear of losing my profits made me sell, and wanting to catch the gain made me buy it back.
What was I chasing that would cause me to dump all my previous positions? There was plenty of attractive candidates to chase today:

I caught TIBX@8.87, RFMD@7.92, and UTSI@9.49 (I bought back HGSI as earlier mentioned). Watched GNBT all day but couldn't pull the trigger. Got an alert on GROW and later on IAAC, but only then did I start thinking ".... let it go".
It wasn't too long ago when the market was slow and boring. Today was certainly not one of those days (at least not for me), and it's when there is so much happening in the different sectors that it is even more important to keep my emotions in check. Today was proof of the damage that can occur when one's emotions are not under control. There was no financial damage to my equity, but all this churning meant a lot of wasted effort.

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