Guest Post By Tony Ellis: How I Turned My Two Best Trades Into My Two Worst
Posted by timothysykes on Sat 21st of Jun, 2008 03:25:07 PM
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If you read THIS post about grad student Tony Ellis making over $50,000 in trading profits over the past few months entirely due to PennyStocking, you know he hasn’t just gotten lucky, he’s been dedicated. As I posted this morning, successful trading really is all about practice and learning time tested rules through your successes and failures, so in the following guest post written by Tony Ellis is quite an important one. He’s had a great run, like many who have already purchased my PennyStocking DVD, but that doesn’t mean he ain’t gonna make mistakes.
Mind you, my dvd only teaches a set of trading guidelines, what has and hasn’t worked for me…it certainly doesn’t have all the answers and actually is quite different for everyone depending on the student, experience level, risk tolerance, discipline and goals. Some things as Mrs. Gump says, “You’re gonna have to figure that out for yourself”.
In short, yes, I try to position myself ahead of big moves, but there is a reason why I’m so quick to take profits, allow so-far-successful-but-still-makes-mistakes-along-with-the-best-of-them
-awesome-for-sharing-not-only-helping-himself-but-others-too-which-rocks Tony Ellis to explain:
We always hear about successes from other traders but I want to share a mistake. I have learned more from my mistakes than from my good trades (TIMcomment: me too!). I don’t want to anyone to have unrealistic expectations. Trading for me and for most people involves mistakes even if most traders don’t admit mistakes (TIMcomment: uhh can you say Elitetrader!). This is what makes Tim’s model of transparency so valuable for learning. I’m here to learn primarily but it’s a bonus if I can help some of you by sharing my experiences.
I went into Thursday holding FPP and TGC long (TIMcomment, awesome positioning man, beautiful clean breakouts as I noted HERE!). I bought 5000 shares of FPP Tuesday @ $5.97 and 15000 shares of TGC @ an average of about $1.59. Perfect entry into both and all I had to do is sell Thursday morning for an easy $10K + profit.
Wrong!
I held both until they tanked, narrowly escaping with a profit and down $8K for the day (boo hoo you little bitch, your worst trade isn’t even a loss? Blehhhhhh, you poor poor highly profitable trader!). Sold FPP @ 6.11 (missed LOD (low-of-the-day) by .06…lol) and TGC @ 1.70. I don’t even want to think about how far my account closed from its intraday high, around 15K I think.
I wish there was an excuse for these mistakes but there’s not. I simply broke all my rules. This wasn’t due to a failure by Tim or his DVD, he would never have held more than 5 minutes after the open (TIMcomment: damn straight!). This was due to greed and overconfidence on my part. The stock market will humble you very quick.
Lessons:
Always have an exit strategy when you enter into a trade. I normally sell immediately after a stock fails to make a new high of the day. If the first strategy is ignored you have to sell if a stock makes a low for the day. I ignored both of these somehow and had to go with my strategy of last resort…don’t allow a gain to turn into a loss. Although I was down huge for the day I still managed to exit both positions with a gain and am still up for the week.
Never set overambitious price objectives for a trade. Going into Thursday morning I had one thing on my mind, make $10K off each position (Tim, any idea how I came up with that number?) (TIMcomment: we humans like big fat round numbers for stop losses, milestones and goals..gotta ignore that weakness and be more like a machine…no expectations). I also had getting to 100% overall gain for the year on my mind. Thinking this way caused me to hold onto these stocks when it was irrational to do so.
The real lesson is to learn from your mistakes and don’t allow one mistake to turn into a whole series of mistakes. I’ve done this in the past and really dug myself into a hole. Back in late February I had a streak of bad trades and foolishly tried to make it all back on one trade. I bought TMA at $2 thinking I could make a huge gain. (TIMcomment: definitely not one of my ideal patterns, just a random financial) I ended up selling the next morning for .90 with my account down 30%. This marked a turning point for me. I took the next several days off to reflect on my mistakes, re-read An American Hedge Fund and watch PennyStocking again. I developed a greater understanding of Tim’s Strategy and have made only a few bad trades since. Since March my account is now up $80K and well over 100%. Hopefully Thursday’s mistake taught me the importance of taking profits quickly. Micro Caps are too volatile to do otherwise.
That’s right folks, Tony Ellis not only admits his mistakes, but now has gone from turning $80k into $130k in 6 months to earning another $30,000 in the past few days alone! This is a teacher’s fantasy so I hope he keeps learning, earning and sharing…the same goes for everybody else too!
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TIM Trades
View All| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| Nov 6 | QXM | $4.31 | $4.80 | $1936 |
| Nov 4 | COT | $8.66 | $8.88 | $642 |
| Nov 4 | QXM | $4.61 | $4.89 | $822 |
| Oct 30 | DDRX | $25.70 | $26.53 | $812 |
| Oct 29 | CTDC | $4.00 | $4.42 | $781 |
| Oct 26 | AWSL | $3.24 | $4.10 | $2516 |
| Oct 23 | RODM | $5.27 | $5.23 | $301 |
| Oct 22 | AMLM | $2.69 | $2.97 | $820 |
| Oct 22 | USEG | $6.12 | $6.09 | $85 |
| Oct 20 | CBOU | $8.93 | $9.06 | $243 |
| Oct 16 | VRMLQ | $16.79 | $18.65 | $2773 |
| Oct 13 | YONG | $11.05 | $11.66 | $1202 |
| Oct 13 | NPHC | $0.59 | $0.71 | $583 |
| Oct 12 | IMGG | $0.60 | $0.70 | $682 |
| Oct 9 | ZAGG | $5.50 | $6.10 | $2380 |
| Oct 7 | GVBP | $0.03 | $0.27 | $702 |
| Oct 1 | NPHC | $0.70 | $0.85 | $1482 |
Total: $92,304 (644%)
