I am presenting a direct copy of an email by one of the readers of TIPBlog. In this email, the reader shared his/her journey and is narrating an experience. After the story I will present my views and thoughts about it.
My experience in stock markets has been one involving many emotions right from elation (beginning with RPower in Jan 2008) to point of being depressed (with the Oct-Lehmann crash)……. I just wanted to share it with someone hoping you can bring some clarity to my investing/trading style and how I can chart a path in this field.
I was a college grad with 1 yr experience and already into a second job (hopping very early) in early 2008 when I got caught in the euphoria of RPower. That was when I actually came to know the ‘ABC’ of stock markets. I wanted to make quick bucks (and still in that mindset I feel) and subscribed to full limit thinking it would double in no time after listing. I even borrowed from my brother to invest on his behalf. I didn’t know what was a ‘bull’ or ‘bear’ and just blindly went on buying stocks which propped up in media and held some 2L worth of stocks during the Feb ‘08 – June ‘08 period. I didn’t even know that a fully charged bear market was ongoing until it was too late for me to grasp the various terms and happenings around the world.
I thought I should just hold on to the purchase (even though the value was reduced to half) but I couldn’t see the portfolio going down everyday and then made my next mistake. I sold these stocks close to their distress prices one would say and booked some 60% losses. One of the reasons I did was pure anxiety from seeing prices going down, second I thought I will sell now (book losses) buy at even lower prices (which I didn’t) and make profits.
I couldn’t have been more wrong. Just when I thought I will begin the stock selection process again (somewhere in Jul ‘08), I got caught with another devastating tool (which I didn’t know that time) of stock markets; The Futures and Options. There was this Kotak Securities agent who lured me into buying nifty futures and she got me leveraged big time (I didn’t even know one had to deposit margin everyday in futures if the closing prices was below your bought price). At one time, I was holding nearly 10 lots of nifty futures LONG (kept on averaging out as the index kept going down) in hope of making lakhs in no time. I even borrowed 1-2L from my brother to keep up the margins. Of course, I didn’t see what was coming. Lehmann happened and when nifty tanked to record lows. The Kotak Security people sold all my positions and at one point I lost 1L in 2-3min. I was super depressed and that Kotak Security agent also, as expected, vanished in thin air.
I don’t know what it was but even after all this, I was (still am) addicted to Futures and Options and since then I have been trading only in derivatives (in between trying to catch some intra-day profits in stocks, lost there also). At one point, I also started borrowing from my friends to keep up the margins. I was lost. It was self consuming one would say. Then I just decided I will stop futures and first time in a long time I did, but again I got attracted to its cousin; Options.
So since around March, I have been trading only in options. Options don’t need one to keep margins plus since in buying options one doesn’t have unlimited losses I thought let me try this and maintaining a record of all my trades but I am still suffering losses. Options are again is a different ball game.
So in nutshell to be honest, I have lost close to 5-6L of money between all this and still trade. I read many blogs, follow economical happenings. All this make me believe I am some hot shot in Finance and one day I will make tons of money only from Options. I feel I am trapped in a mirage and just locked out financially…..
I have started learning TA, do some basic analysis on charts, find patterns etc. Recently, the Quant approach has begun to grip me and I am following blogs there thinking I will develop some super-duper trading system which will make me rich.
The only solace has been I no longer trade in Futures. Not leveraging much (because of lack of money), and taking some disciplined approach (compared to a year earlier) but still like I mentioned there is no performance to be proud of. You would agree that this is contrarian to your approach. You are a value investor and I am currently an impatient trader……
My apologies for such a lengthy mail. This write up (in the past 1 hour) has actually made me think about my mistakes again.
Following are my thoughts:
- It is commendable. It takes guts to share your story and accept your mistakes.
- I can say with confidence, this reader is not alone in this conundrum. This reader is not the only one losing money in stock market.
- This reader is not the only one who is getting attracted, allured, and fooled in this game of making quick money. I lost similar amount in my early investing years.
- The good thing about this situation is that the reader is still early in investing career. Reader is still in twenties, and hence made mistake very early. Had this happened in late 30s one would have been bigger trouble.
- Accepting one’s mistakes, and willing to change, is first step in a learning process.
Note: This story is published with permission from the original author or reader.
beginners guide, investor story