Tuesday, December 28, 2010

the stock market experience

I suck big time at Mathematics.

Seeing numbers was just like remembering that 78 grade I got from Algebra way back in high school. But after reading a few finance books and realizing that if I want to get a go at being a financially literate person, I would have to love numbers, or else, its good bye to my bank account and everything with it.

We attended a short seminar at a brokerage company called Citiseconline around 3 weeks ago. The trainer, the vice president of Citisec told us very clearly that day trading is a lot of risk. Bo Sanchez a famous preacher here in the Philippines also said to just leave the trading to the traders. But then again, since there's much a much bigger return at the riskier investment, we decided to give it a try.

The first stock we invested at was Petron. Good thing, there was a lot of hoopla regarding it being acquired by San Miguel. Thus, we decided to give it a try and buy stocks worth 20,000 for 14.70/share from Petron. For three days, we owned a part of Petron, and just when we felt it was right to do so, we parted with it at 16.20/share. I recall seeing the stock price go up. We would have made much more, but seeing that we made around 2000 bucks in just 2 days, it was a good investment, or probably as old people would usually say, just beginner's luck.

A week after, we computed possible earnings and decided to put our money at a company called Abacus. It showed potential with a yearly return of profit at 500 million. The stocks first traded at 0.85, we bought it at 0.90 per share. We made a mistake though, we forgot to check the holidays, and since the 24th and the 27th were both public holidays, our money stayed stagnant for 4 days. Awhile ago, the ticker screen (the screen that displays stock prices) was open once again. The 0.90 stock increased to 0.94 in just 10 minutes, then as quickly as it went up, the stock plummeted down to 0.86 before I could even press the "sell button". I was looking at the red on the screen and the numbers showing we lost 800 pesos already.

I was still keeping my fingers crossed, but I was looking glum. It was probably just beginner's luck. And just when I was about to text my fiancee to tell him we lost 800, the stocks changed from red to green. The 0.90 stock became 0.91 and closed at that price. Phew! That was one close call! I checked our portfolio and it showed we earned almost 200 pesos. Some would say it is too low, for me, I was just thankful we did not loose any money.

Now, after boring you with the long experience on trading at stocks, I realized some things. Hopefully, it would help some beginning day traders to know when to quit and when to keep on holding. (note: these were only based on what I observed)

1. When there's some news regarding a company and its good, people go into a buying frenzy. Watch that stock from the opening to the closing and observe if what I am saying is right. If people go into a buying frenzy, the stocks increase like crazy too. And so does your money, if you put it at that stock.

2. Know when to pull out - people loose thousands of pesos and even millions at the stock market because they get too greedy. Like me awhile ago, I was thinking the stock prices of Abacus would go up to 1 pesos per share.

3. In relation to number 1, if there is no news about the company after the buying frenzy, sell your stock fast (especially if the company is not listed at the top 30) it's better to have gained some, than too loose everything.

Oh and last but not the least, trading in stocks is like trading in real life. You may be in the red sometimes (like what happened to the people at Manila whose houses got burned by a fire last 24th) but everything is just temporary unless you want it to be. Companies change to green when they gain profit or are posting strong returns, so is life. You can only win, if you believe you can and if you try to evaluate yourself. Then you improve on your weak points and get on with life.

Awhile ago, I felt really bad seeing the red ticker screen on my Abacus stocks, but then I realized that everything is just temporary. Change comes more often. Sometimes things do not always turn out as planned but in the end, it's your next actions after the changes that matter most.

But tomorrow, I'd say goodbye to Abacus. And I do hope, it would be one good decision. Fingers crossed, ticker screen hopefully greener, the numbers much better.

And that's coming from someone who hates Mathematics. lol

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