Trading Growth - Investing in stocks, investing the stock market, growth stocks

Archive for the ‘Lessons Learned’ Category


Posted on July 24, 2008 - by andrew

You are in Control of Your Portfolio

If you’ve ever suffered a losing streak when buying stocks, you may have felt like stocks were just out of your control. After all, it’s not your fault that oil is going through the roof and the mortgage mess is spreading like wildfire. Often times the market is out of your control. However, you are in complete control of your portfolio, and many of the risks associated with investing in stocks can be eliminated.

How’s this possible? If you follow a sound trading strategy like CAN SLIM, you can eliminate a lot of avoidable risks. Certain things may be out of your control in the stock market, but by eliminating as much of the avoidable risks as possible, you increase your chances of success.

If you want to be successful at investing in stocks, you must be accountable for your mistakes. You can’t blame the stock market for everything. If you did, you would never take the initiative to review your mistakes because you would never think that those mistakes were actually your fault. If you never review your mistakes, you will never learn from them and improve as an investor.

A recent example from my personal experiences was buying Continental Resources (CLR) . I bought CLR in early July when oil was heading to the mid $140 range. The market was still in a correction and it was no time to be buying stocks. I ignored this CAN SLIM rule and bought a large position in . I felt that this was a great time to buy because of the huge gains it was making on huge volume and the previous run-up it had.

Buying eventually costed me -7% loss. This added to my string of losses since March 2008. It would be easy for me to just blame the loss on to bad luck. But you have to take an honest look at your trade to find out what exactly went wrong. I broke a cardinal rule of CAN SLIM investing and bought a stock during a market correction. The odds were stacked against me and I shouldn’t have bought the stock no matter how strong the buying or how big the previous run-up.

I realized that I was on a losing streak since March because I was taking too many avoidable risks that eventually cost me. Imagine a football coach going for it on fourth down every time. It’s just not worth the risk if you can make up for it later in the game. I knew at that point that I was in complete control of the success or failure of my portfolio.

When investing in stocks, you have to eliminate as many avoidable risks as possible. Use the rules of the trading strategy you’re following and screen out all of the bad, risky stocks. Then take the remaining stocks and use your best judgment on which ones to buy. This way, you eliminate as many risks as possible and you gain considerably more control of your portfolio.

If you are interested in learning more about CAN SLIM, visit the Learning Center on Investors Business Daily.


Posted on July 19, 2008 - by andrew

Big losses makes you a more disciplined investor

At some point all of us have heard that it takes discipline to become a successful investor.  Disciplined investing usually refers to how well an investor follows the rules of his trading strategy. Most of the time, however, this discipline only comes after making big mistakes and taking big losses.

The trading strategy I follow is CAN SLIM. It emphasizes a few key rules:

  1. Only buy stocks during a market uptrend (i.e. not when the market is in a correction).
  2. Only buy stocks breaking out of sound bases (or patterns) on strong volume (i.e. volume that is 50% or greater than the stock’s average daily volume).
  3. Do not buy a stock that has risen 5% past its buy point.
  4. Sell all stocks that go down 8% from your purchase price.

These trading rules sound easy enough to follow, right? However, this is usually the furthest thing from what actually happens with most investors. As I’ve learned, being a disciplined investor and sticking with the rules religiously is not easy for most people.

The single factor that influences your decisions the most is money. When real money is to be made or lost, your emotions affect your trading and investment decisions. I’ve often found myself breaking the CAN SLIM rules listed above repeatedly. Here’s what typically goes on in my head when I break a rule:

  1. I can bend the rules because this time is different
  2. I can get a jump on everybody else if I make my trade now (i.e. Buying before the stock reaches a proper buy point)
  3. I’m down, but I have a great feeling about this stock and it’s gonna go back up.

I’ve made so many bad trades over the years from acting on impulse and emotion. Afterwards, I review each bad trade to try to figure out what I did wrong exactly. Then I just tell myself that I just won’t make the same mistake in the future and hope that I don’t do it again…

But I realized recently that the only way to truly learn your lesson is to lose a lot of money on a poor trade. You have to get burned before you learn not to play with fire.  I would make the same mistake over and over again and not learn my lesson. Then I find that I eventually make that mistake again, lose a ton of money and have a bitter taste in my mouth for a long time.

When a similar situation arises again, you’ll go back and remember what it was like to have lost so much money. The perfect example of this for me is when I was buying Jones Soda (JSDA) in the summer of 2007. I had been buying at improper buy points. On top of that, I was averaging down in my position (i.e. buying more of the stock as it went down in price) because I was gambling on the hope that they would report great earnings.

Eventually, I was down as much as -20% when I finally decided to sell . I had lost way more than the -8% loss I should have limited myself to. On top of that, I realized why it was so bad to average down and buy at improper buy points.

In conclusion, developing discipline when it comes to following a trading/investing strategy takes a while for the most of us. As you make the same mistakes repeatedly, hopefully you eventually get burned so bad that you never make that same bad trade again. Treat your loss as a valuable, expensive lesson on the way to becoming a disciplined, successful investor.

If you are interested in learning more about CAN SLIM, visit the Learning Center on Investors Business Daily.


Posted on July 7, 2008 - by andrew

Lessons learned from LNN

  1. Don’t ever buy stocks during a correction
  2. Don’t try to make up for losses by going into a stock and thinking it will be a home run. you can’t determine this ahead of time based on past performance
  3. When stocks dip on heavy volume the session before earnings, SELLLLLLLLLLL!!!!!!!
  4. Do not let past huge runups trick you into thinking the stock will continue to do the same going forward. It’s not guranteed.
  5. Try to juggle two differnet buypoints as a justification for getting in early is risky. Just wait for the higher buypoint if you aren’t sure what t

This huge -22% / $-1200 loss could have been avoided had I just not bought the stock during the correction. I thought I could outsmart the market because of trends in agriculture I thought I nailed down. None of the fundamental or technical analysis means anything if they disappoint on earnings.


Posted on June 16, 2008 - by andrew

Buying PQ too late…right at the +5% mark

Today PQ jumped +10% on higher volume…..two days after I sold it at an -8% loss. Had I not bought it at +5% above its buypoint, I wouldn’t have gotten shaken out and would have been able to reap the gains from today’s move.


Posted on June 8, 2008 - by andrew

Lessons Learned (1st half of 2008)

  1. Stop buying right at the open: volume and prices are misleading and tend to reverse as the day goes on.
  2. Avoid buying stocks out of the top 20 IBD Industry groups
  3. Get back into stocks slowly at the beginning of a rally
  4. Be cautious in buying recent IPO’s
  5. Do not put more than 25% of assets in one stock
  6. Make sure a stock makes progress after crossing its buypoint before filling out the position
  7. Once you have a stock that you are confident in, try to ride it out until you take a -8% loss

Posted on March 31, 2008 - by andrew

Getting into the market too fast after a confirmation day……..

I have done this three times (January, February and March 2008). Each time I bought, I was too eager to not miss the boat, and I ended up buying 3-4 stocks and taking full positions in each. Once the market’s rally stalled, these stocks would soon start falling and I ended up taking losses on each.

 This was an avoidable mistake. However, its easy to worry about missing the rally as opposed to waiting a while for the rally to prove itself.  In hindsight, I should have just been looking for 1 stock instead of 4 and made sure that it actually broked out on strong volume.

 There’s no need to rush to find the new leader right after a rally begins. Most leaders will break out within 3 months of a rally’s confirmation day. If you do good analysis and research, a prudent investor is sure to get a hold of at least one of these leaders and profit from them.

I am convinced that doing it this way is bound to be more successful than going ‘all-in’ and taking a hit, even if you did cut your losses at -8%. I hate losing either way. Knowing what I know now, all those losses I took could have been avoided had I just been more patient….. I guess part of it too is having a keen eye of knowing when the rally is not acting right in its beginning stage.


Posted on December 22, 2007 - by andrew

Market’s Rally back on track…….

Looks like I was right in selling my stocks  during the market’s recent bout of weakness. After 3 days of increasing on heavier volume, the Nasdaq seems to be back on track with its rally.

Right now, I just want to get the best, highest-quality stocks, not necessarily the ones that will go up the most/fastest.


Posted on December 17, 2007 - by andrew

Lessons Learned: Sold everything for now

I was already close to my 8% loss rule for most of them and I didn’t want to risk losing any more ( I was already down $2K since the rally began).

 The rally looks weak and I would rather just sit on the sidelines and wait for something to happen to get back in.

The stocks I liked were for the most part below their buypoints anyways. I could always get back in at a good point.

However, I would now need to exercise more caution going back in this time. Only get the best ones and not go all in all at once.


Posted on November 9, 2007 - by andrew

Market Correction of November 2007

Looks like we are in a correction, according to Investors Business Daily. I agree. Now its time to build on that skill I developed during the Summer 2007 correction: keeping a good watchlist of potential leaders…

 This paid dividends for me when the market rallied from the Summer correction. Its just that my sell rules were not sound and I ended up selling big winners I had originally bought in August 2007 (RIMM , DRYS).

 However, I did miss out on some leaders like BIDU. Now I need to do a better job of evaluating what the company does and use my good judgement to determine if they have good growth prospects.

 I also need to try to do a better job on picking the strong industry groups and concentrating on the stocks belonging to those groups.

 Besides that, I should look at the charts of the stocks I bought and sold during the latest rally to review my mistakes and my successes.


Posted on November 9, 2007 - by andrew

Keep It Simple, Stick to Basics

I need to master CANSLIM investing. I feel like this is how I will get back on track. I make good decisions on which stocks to buy, but not on when to sell them.

 I think I got caught up in different technical analysis techniques I had been reading about. Not knowing how to really apply them, I started making decisions based on them. This was a mistake for now because I had just started getting the hang out CANSLIM and reading charts.

I just need to focus on one strategy and master it through pig-headed discipline. This is better than trying a dozen other strategies. I just need to focus on this one strategy and do it over and over again until I have mastered it. Only throught discipline will I achieve mastery.

 I did start to get bored reading Daily Stock Analysis and Investor’s Corner articles on investors.com. It was because I was learning and retaining after 2 years of disciplined practice…..not because the content was no longer relevant.

 I still have lots to learn. I need to go back to basics and continue to read those so-called boring articles and get my fundamentals back. I just need to keep it simple, and stay disciplined in my learning.


Posted on November 7, 2007 - by andrew

I think I bought China Finance Online (JRJC) too soon…

Upon looking at the chart again, it looks like is forming a base instead of rebounding from its 50 DMA. I think its a new base because it corrected about 36% from its $47.68 high over the last 5 weeks.

The bottom of the base did touch the 50 DMA, which was why I was quick to think it was a rebound. The move today was so strong that I felt the need to move quickly and did not go to double check the chart….


Posted on October 31, 2007 - by andrew

Sold 20 Garmin (GRMN) @ $112.00

Sold my position in today:

  1. Was down -5% in pre-market after reporting earnings
  2. Lost -7%

Lesson Learned: Don’t touch stocks that plunge towards their 50 DMA…………………


Posted on October 24, 2007 - by andrew

Review: Trying to play Amazon.com (AMZN) before its earnings

I think that it was definitely worth it holding for a week and waiting to see what happened when it reported earnings. Given how well it did in the previous 2 quarters and how well tech stocks have been doing in general, I saw more upside potential than downside.

 I was able to walk away with a tiny loss. The mistake was not taking profits when I was up +10% the day of earnings. I ended up watching my 10% profit dwindle away in after hours trading.

 All in all, I set up a Stop order to sell at my buy price. We’ll see if that was the right move. But I only planned on holding until earnings reported, not any longer than that. It didn’t do what I wanted so I sold. Had it went up, I would have put a trailing stop order in.