During the summer of 2015, I saw an ad for a new app called Acorns on Facebook. The Acorns investing app works by encouraging you to invest your spare change. Using a system they call “round-ups,” Acorns monitors your bank account and automatically invests the change from your daily purchases. I started to research and even deposited a little money to see what could happen. I quickly found out, that Acorns is more for the long term.
Next, I discovered penny stocks and Robinhood. I bought a few hundred shares of a few stocks that were around 10 cents. I started to use stock profit calculators dreaming of what could happen if my investment went up to a few dollars.
A few weeks of playing with these stocks, I quickly lost some money and got my first lesson about bagholding.
I started to learn about technical analysis and different trading strategies on various websites. I eventually made the switch to a TD Ameritrade account thinking their trading platform and tools were better than Robinhood.
Within a few months, I discovered Stocktwits and found quite a few scammers selling courses and subscriptions to their trading chat rooms. I foolishly subscribed to a few of these thinking it would help me do better with stocks.
About 5 months of trading I started with $5500 of savings and lost more than half of it. I lost over $1000 in commissions alone from TD Ameritrade because I was trading quite a bit.
I ended up giving up on stocks for a bit convincing myself that the people on the other side of these trades are either very smart people who study the markets 24/7 or computers that have much faster executions than me.
In 2016, I started up my Robinhood account again and tried a few trend following strategies after reading a few books and had mixed results. I think I didn’t do as well as I hoped because I was looking for gains in a short timeframe and trend following is a longer term strategy.
Now in mid 2017, I am back to trading again with Robinhood. This time I am trading with $500 since I am still playing around with different strategies.
Here are rules I am following so far and I’m sure these will change as I fine tune in my latest strategy.
- Avoid Stocktwits and any other social media regarding stocks.
- Avoid Stock Picking Services and Gurus.
- Do not trade and stocks that are not on NYSE or NASDAQ.
- Do not trade stocks that have less than 500,000 average daily volume.
- Do not risk more than 1% of my portfolio on any trade given my account size.
- Position size using 2x-4x ATR (Average True Range).
- Buy stocks only during the last hour of the trading day.
- Add a stop loss on every order.
- Trail stops every time a new high of day is made.
- Do not exit any trade until stopped out.
I have discovered so far that the stock market is random and you have to take what it gives you. I am convinced if I can keep my losses small and let my gains run, I will be profitable in the long run. I will post more on the subject in the future.
A few books I have read along the way.
- How I Made $2,000,000 in the Stock Market by Nicholas Darvas
- The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder
- The Honest Guide to Stock Trading: Make Market-Beating Returns. Achieve Long-Term Wealth by Llewelyn James
- Technical Analysis For Dummies by Barbara Rockefeller
Also, if you are thinking about signing up with a guru, I highly recommend you check this site out first to help you avoid scammers: http://www.tradingschools.org .