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Experience of a Naive Market Operator
Gautam Dev
Short Essay
in future? Hmm…
Anyway, I keep on learning. P/E ratio, PEG and YPEG,market cap, book value, uptick,downtick, short interest, put/call ratio and what not. At this point,
Anyway, I keep on learning. P/E ratio, PEG and YPEG,market cap, book value, uptick,downtick, short interest, put/call ratio and what not. At this point,
someone suggested I start watching CNBC also . So I turned on CNBC one day, and I saw Maria Bartiromo (Or Maria Bartaromo?),speaking from the NYSE at the top of her voice. So I thought stock market might not be so boring after all. I also started listening to the guests. One day one analyst came,and he said instead of studying the individual stocks, one should study the economy and try to gauge the overall market. So I start studying the economic numbers, PPI, CPI, ECI, unemployment, wages, etc. So one day the unemployment numbers comes out, it was lowest in fifty years! I thought, wow! This got to be a good thing for the market. Wrong! Stocks tumbled big time!.Later in the day, I learn from some analyst that this kind of stock market action was expected because what is good for the main street is not good for Wall Street. OK…I guess that makes sense. So I learn few more things. I learn that stocks go up because of good earnings.According to Peter Lynch, earning drives the market; it is not that complicated. Well, one morning one company announced super good earnings for the year, and the stock went down! But the same analyst came on to CNBC and said the good news was already priced in to the stock, so when the news actually came, the stock went down due to profit taking. According
to him, this was classic case of buy the rumor, sell the news. And so it goes.
As I was learning various things, watching CNBC,surfing the web, surfing yahoo finance, reading motley fool etc, I started placing some trades also. But to my horror, all stocks immediately goes down after I buy! I would watch a stock for a while and see it going up down, between say 30 and 40. So I tell myself why don’t I buy when it touches 30, and then sell at 40? It had never betrayed this trading range, I have been watching for two weeks! Little did I know. As soon as I buy the stock, it starts falling prey to gravity. That day it closes at 28. What do I do now? Do I sell it and incur a $2 loss? NO! In stead, I put a limit order to sell at 30. I want to just break even this time. But guess,what happens? Next day it opens at 27, and drift lowers the whole day, finishes at 26 1/8. Now it looks like the stock has never seen 40 in its life. So I say to myself, I want to hold this one a little longer. One day it must come back to 40. Seven days later (which felt like an eternity to me), the stock close at 20 5/8. It seems like it is ready to fall into teens. At this point, my patience breaks, and I sell it for almost 10 point loss. I console myself, well it will go 10, then I will but it, and sell it at 20. So I will break even after all. The very next day, the stock gets upgraded by an analyst, and it rallies like there is no tomorrow. It goes up for three straight sessions and close at 29 ½ for the week. At this point someone like you may be thinking, I must have bought this stock at that price. No I didn’t. I can not say I was not tempted. But I got fed up with the stock
As I was learning various things, watching CNBC,surfing the web, surfing yahoo finance, reading motley fool etc, I started placing some trades also. But to my horror, all stocks immediately goes down after I buy! I would watch a stock for a while and see it going up down, between say 30 and 40. So I tell myself why don’t I buy when it touches 30, and then sell at 40? It had never betrayed this trading range, I have been watching for two weeks! Little did I know. As soon as I buy the stock, it starts falling prey to gravity. That day it closes at 28. What do I do now? Do I sell it and incur a $2 loss? NO! In stead, I put a limit order to sell at 30. I want to just break even this time. But guess,what happens? Next day it opens at 27, and drift lowers the whole day, finishes at 26 1/8. Now it looks like the stock has never seen 40 in its life. So I say to myself, I want to hold this one a little longer. One day it must come back to 40. Seven days later (which felt like an eternity to me), the stock close at 20 5/8. It seems like it is ready to fall into teens. At this point, my patience breaks, and I sell it for almost 10 point loss. I console myself, well it will go 10, then I will but it, and sell it at 20. So I will break even after all. The very next day, the stock gets upgraded by an analyst, and it rallies like there is no tomorrow. It goes up for three straight sessions and close at 29 ½ for the week. At this point someone like you may be thinking, I must have bought this stock at that price. No I didn’t. I can not say I was not tempted. But I got fed up with the stock
