This morning, I found myself stuck in some serious rush hour traffic, and being in a hurry to reach my destination, I was switching lanes constantly (not driving too aggressively, mind you), attempting to navigate my way into the fastest lane. However, I found the harder I tried to get past the traffic, the more I ended up in a mess, stuck in the lanes that were not moving at all. It just seemed like every time I tried to switch lanes, I was always a “day late, dollar short”. By the time I switched lanes, about ten other cars would have also switched into the lane, ultimately causing me to get stuck in a jammed lane, when the lane I was previously in would suddenly start moving, and the car that was once behind me ended up ten cars ahead of me.
It hit me that driving during the rush hour jam is a lot like trading in the stock market. If you’re trying to squeeze your way into the (at least what seems like) faster lane, you better act quick and decisively, otherwise you’ll be too late and you’ll just end up even more screwed then you were in the “long” lane. Same exact principle applies to day trading. In order to make money off high volume, ‘in the news’ stocks, you better get on the bandwagon before the stock reaches its high for the day, otherwise you’ll end up losing money you could have made had you held onto a less risky, solid growth stock.
It’s a dog-eat-dog world out there, and nobody cares if you’re late when your on the road, except yourself. Likewise, if you’re the emotional, indecisive trader in the stock market, nobody is going to try to help you when you start losing your hard-earned cash. Either take the risk boldly and cherish (or suffer) the rewards (or consequences), or don’t get yourself in the sticky web of chaos in the first place.
Well, there’s my rant for the day. Time to jump on some trades, so I don’t end up a dollar short like I was this morning. What does the stock market remind you of?
Day trading is a gamble, no doubt about it. But it’s also a test of character. It’s a combination of how fast you can react on breaking news, how confidently you can invest money, and how quickly you can execute the respective orders. People who waste time deciding whether or not to invest are the losers; people who jump on each and every opportunity for money are the short-term winners. In day trading, you’re not deciding who’s going to hold onto your money for months, or years. You’re deciding who gets the chance to hold onto your money for seconds. So you gotta make up your mind fast, or you’ll lose out on some real money making opportunities.
Today, however, I experienced something somewhat out of the norm of day trading. The ask price of a stock is almost always higher than the bid price, I mean, that’s basically the foundation of the stock market. Seller offers higher than what the stock is worth, and buyer offers lower than the stock is worth. Simple. There have been a few times during after-hours wherein the bid price has risen above the ask price, but usually it’s because of some kind of transaction error or stale market data, and whatever asking/bidding (selling/buying) that goes on does not reflect the stated price.
Ambac (ABK) stock is shown above. As you can see, between 15:31 and 15:33, the bid price suddenly spiked above the ask price. Keep in mind the stock was nearly stagnant for a good ten minutes before this happened.
MBIA (MBI) stock is shown above. Considering MBIA is also a bond insurer, and also suffering from the same CDO (Collateralized Debt Obligation) mumbo-jumbo that Ambac is going through, the two companies tend to have the same ups and downs.
Anyways, I immediately called my TD Ameritrade representative and asked for assistance. Being as this is quite the anomaly in regular hours trading, I had to get to the bottom it. Meanwhile, I also purchased 300 shares of MBIA at 15:31:30, priced at 11.82, even though the bid price was 11.91. Wow, what a deal! I bought stock for lower than what other bidders are offering. So yes, I happened to be one of the two purple circle trade markers on the green ask price line on the MBIA chart at 15:31:30.
The TD Ameritrade representative wasn’t of much help, but she did get her supervisor to confirm that there were no errors in my transaction. I’m led to believe by the broker that I got stock for a bargain price because a handful of news was just released to investors. Therefore, there was not enough time for the sellers to adjust their asking prices, even though the bidders were successfully purchasing stock at the higher, anticipated price, and raising the bid value of their own shares. Talk about some news, Ambac and MBIA continued to rise till the end of the day and even into after hours.
I recovered a good portion of my losses from yesterday. Thank God.
Day trading is an extremely stressful gamble to take part in. It’s no wonder NYSE day traders have been known to have the highest suicide rates among all white-collar jobs. Probably one of the worst feelings in the entire world has to be losing money in real-time on a risky day trade. There is nothing worse than seeing your hard-earned cash evaporating on a computer screen, leaving you powerless as you lose it all. The worst part is as we hold onto the stock, in hopes that it will recover, we’re often just slammed with more losses. At the end of the day, you pretty much lose all sense of reality. Your brain’s dopamine is reduced to near nil, and you feel like you’ve wasted your life.
“Yesterday,
All my troubles seemed so far away,
Now it looks as though they’re here to stay,
Oh, I believe in yesterday.”
-The Beatles
Yesterday, by The Beatles, represents how I feel when I lose a few thousand in a day in the stock market. It stinks. You regret every part of it. You could spend a whole month day trading, make $10,000 on a $50,000 cash account, and lose it all in one day. One hour. Heck, a few minutes. If only there was a way to go back in time… to yesterday, when troubles just seemed so far away…
It’s been proven that losing money has a bigger emotional effect on the mind than does making it. I don’t remember the source (I believe I heard it on CNBC during Power Lunch), but losing money has a 2.5X bigger emotional response than making money. What does that mean? The effect that losing $1,000 has on your brain releases the same amount of dopamine as making $2,500. Crazy, huh? We really do hate losing our money.
However, there are ways to stomach your losses. There have been many times were I’ve wanted to call it quits, cash out, and go cry home about how much I’ve lost. But I don’t. I keep doing it, I keep riding the waves, and I never give up. Here’s how I keep going:
Go crazy - get some stuff you don’t mind destroying and place them nearby your desk. Believe me, it’s better smashing a $5 RadioShack micro-RC car to pieces then punching your 21″ LCD and cracking the display, or tossing your iPod out the window. It can get pretty bad sometimes, so make sure you’ve got something to squeeze on.
Get an aquarium - you’d be surprised how stress-relieving an aquarium can be for your work environment. When times are at their worst, just take a look at nature. The fish go round and round, nothing bothers them. You be the same. Try to control your emotions and learn from the fish: don’t give up on life (or stocks) and don’t let anything bother you or keep you from cherishing life, however pointless it all may seem at the time.
Listen to loud music - depending on whether your workroom is a public office or your home room, you may or may not need headphones. Just jam out. I personally drive around town in my Audi A4. Nothing better than cranking up the two 12″ Alpines to max bass tuning out the buzz of the real world. Which brings me to…
Go for a cruise around town - hop in the car, roll down the windows (if it’s nice, sunny, and warm outside), and drive around town. Though this may or may not be fun depending on what make and model of car you have and how comfortable you are driving, but however you feel, remember to drive safely, and you may just return home a little less stressed out.
Grab a drink - this should be one of your last resorts, and should only be done amongst a group of friends. Sometimes it’s good to get smashed. With the stock market, getting drunk and forgetting about it may be one of the best ways to pull through a big loss. The second you sell your holdings of the stock, you lose your money. But forget about it with the aid of alcohol, let the stock recover the next day(s, weeks, months), and you may even make some money!
Play a video game - it can be fun, even for adults. My personal favorite is GTA: San Andreas. Nothing better than runnin’ around town shootin’ up everything you see within a 100 foot radius. Just make sure you limit your anger to in-game. I don’t want to be held responsible for encouraging the next mass-murdering day trader tomorrow on CNBC.
Have a love life - when the market closes and you’re done for the day, stop thinking about the markets. Call up your girlfriend and do something fun. Whether it’s watching a movie or having sex, you won’t be losing as much hair as you will sitting behind the computer mindlessly lamenting over your loss. Having someone there for you is probably one of the best feelings there is.
Good luck, and don’t forget to get some sleep. Sleeping trouble (only in the stock market, where making money is mostly a gamble) away is probably the safest way to reduce stress and improve your chances at having a better, energy-filled day tomorrow.
Today was a sad day for the NYSE. The DOW closed down 370 points, the biggest one day percentage drop since February 2007. Personally, I suffered major losses. I bought 500 shares of both NWA (Northwest Airlines) and ABK (Ambac) on news that oil prices dropped and a recovery plan is in the works for the bond insurers, respectively. However, they both closed down around unch, but I bought too high mid-day when they were both on an upward trend, so I suffered major losses by the end the day (don’t want to name specifics, but I lost in the $X,XXX).
Market plummeted because Federal Reserve Richmond President Jeffrey Lacker dropped the “R” word in a speech today. What is the “R” word? Recession. And that obviously scared the bee-Jesus out of investors. Not to mention poor financial sector reports and other misc. bad news. Heck, I was just watching CNBC, and they declared today as “Terrible Tuesday”. Boy, they were sure as hell right.
As they say, you win some and you lose some. So far, my stock portfolio over the past month still has a 4% increase, even after today’s substantial losses. And I’m pretty sure we’ll bounce back tomorrow. Markets have been declining heavily for a few days now. It’s about time for investors to regain their confidence and buy some damn stocks. How does “Winning Wednesday” sound to you?
With Yahoo!’s market shares losing nearly 40% of their value just in the past three months, and no immediate recovery plan in sight (at least anything announced publicly to analysts and investors), there doesn’t seem to be much light at the end of the tunnel. The 50% increase in stock value on 2/01/2008, upon news of Microsoft’s offer, only goes to show how bad Yahoo!’s situation is: the buyout is the only way they can potentially recover, unless they take some drastic measures to curb their losses. And by drastic, I mean revolutionary. Something that can best Google’s offerings. Something that will change the face of the Internet as we know it. Otherwise, at this rate, Google will continue to absorb users, advertisers, and effectively, potential cash from Yahoo!.
On a personal note, I have recently stopped using Yahoo!’s publisher advertising program, as their RPC (rate per click) has plunged since the program’s onset. Their lack of support for the big publishers, and extremely limited advertiser pool has sent that program down the tubes. I know many fellow webmasters who have also flocked back to Google’s Adsense for their contextual ad serving needs; Yahoo!’s just not cutting the check anymore.
There are a few precedents of technology corporations taking over competitors. The Sprint acquisition of Nextel was one such monumental failure of a purchase. Sprint, with a mindset to use Nextel’s failing network (famous for the push-to-talk walkie-talkie fad) to expand their own network, and hopefully boost their customer reach and better overall service, literally dropped like a rock after reeling Nextel in. After reaching a 52-week high of ~$24 a share in stock value just after the purchase (which falsely boosted investor confidence), Sprint Nextel has plummeted to the point where, just the other day, Sprint announced they are writing off most of Nextel’s purchase value (near 30 billion dollars). Check out their one year stock performance:
This doesn’t necessarily mean that Microsoft will tank if they buy Yahoo!. If they manage to work on Yahoo!’s search algorithms and promotion, and refine advertising stances as well as vastly improve Yahoo!’s publisher advertising network (which is still in BETA even after years of development), they might have something which could potentially take a chunk out of Google’s market (which creates most of its respective revenue from the Adwords/Adsense program as well as sponsored search results).
Lets not forget, however, the main difference between Microsoft and Yahoo! structure: they operate and create their main revenue from two totally different markets. Microsoft has been for years developing and producing a tangible retail product (Windows, of course), and successfully selling it to billions of consumers all around the world. Microsoft has a solid growth plan with multiple layers of fiscal protection, not to mention it’s backed by the richest man in the world, Bill Gates. Sure, Microsoft has been also spending R&D money on improving their presence on the Internet, but so far, all progress has proved lackluster. Heck, the only reason “Live Search” gets any traffic is because IE’s homepage is MSN.com. When a monopoly still fails to compete against Google, you know you’ve got some issues.
Microsoft’s budget appropriation over the past few years has been extremely poor, and their innovation in the world of technology has been near nil. The Zune was poorly accepted by public as it featured no major incentives for iPod users to switch over (not to mention the branding factor that Apple’s marketing dept. did a hell of a job on, which Microsoft utterly failed to reproduce), Vista was void of any real-world improvement to give corporations a reason to re-train staff and spend thousands on new licenses for PCs, and various web ventures like Live.com failed to even barely entice Internet browsers to change their homepage from Google. IE 7? A joke compared to FireFox, king of the browsers in this day.
If I were Bill, I’d be wary of this deal. $44.6 billion dollars is a lot of money, especially for a web-based company. The web bubble continues to grow with each and every over-priced dot com sale. The poor spending habits as of late will surely come back to haunt them in the distant future. Microsoft surely won’t go out of business, but they may be in for some hard times ahead if they go through with this deal. Don’t say I didn’t warn ya.
So I’ve spent the past few days experimenting with afterhours trading. For those who have no clue what that term is, it’s basically trading stocks after the market closes (standard 9:30 A.M. to 4:00 P.M. EST). A lot of fellow investors have previously warned me about the high risks associated with afterhours trading, but I decided to take it for a spin. Can good money be made on futures?
Not really, unless you’re really damn good. Allow me to explain why afterhours trading is so risky:
1. You don’t have the inside scoop - with the NYSE/Nasdaq filled with tons of traders located in NYC itself, amongst the brightest of investors in the world, coupled with a handful of advanced prediction/news tools not available through the standard online brokers, any money to be made is usually grabbed up by the elite traders in the afterhours arena.
2. You’re trading directly with other shareholders - there’s no middle man. Trading afterhours is literally trading between other shareholders that use online brokers. Investors set the bid price, shareholders set the ask price, just like day trading. The catch is that since the actual company’s monetary status is not involved in affecting stock prices, afterhours trading makes no affect on the “real world” value of the stock. It’s all in your mind, really.
3. Low trade volume, poor liquidity - low trade volume (especially on micro/small/mid-cap stocks) makes for an extremely illiquid platform for investing. There’s no guarantee that you will be able to find a buyer for your shares at your asking price: there’s simply not enough people to assure each trade goes through, even if you set your sell order under the lowest ask price!
4. Green futures doesn’t necessarily mean a good day to come - since your dealing with virtual value of stock, essentially your just dealing with investor confidence. Though most companies tend to release big corporate fiscal news after normal trading hours, the actual impact on the real world stock value often cannot be felt till the next day of trading. Not to mention oil prices, Fed news, etc which can easily sway what happens to the stocks closing price the next day.
5. Quotes are just unreliable - with no actual trading floor in session, a low volume of traders, and a plethora of technical issues with the online cross-broker trading, you never really know what the stocks realtime value is. Quotes are often delayed heavily, and lots of orders are not followed through. Remember to set a limit price; setting a sale/purchase at market price in afterhours could cost you.
Have I made money afterhours? Yes, a little. But with a relatively small cash account (no, I don’t have millions lying around to invest), there’s really no point stressing over the pocket change.
Airline stocks rose today (CAL, NWA specifically) on hopes of oil prices dropping soon (Friday). Bond insurers like MBIA (MBI) and Ambac (ABK) also rose dramatically. It’s funny, MBIA and Ambac continue to show that even though they are competing corporations, as an industry, they work hand in hand. When one goes up, so does the other. MBIA went up today because company officials reassured investors that they have enough liquidity to make it out of the “mortgage crisis” that’s currently going on. Ambac shot up in suite. Unfortunately, I sold all my stock of MBIA yesterday. Should have held on to it a bit longer. Heck, the bond insurers were the reason the DJ was up in the triple digits!
Personally, I had my money in Sprint (S) today. It closed up ~3%, which really isn’t much, but considering the rest of the telecoms industry took a plunge, I’m happy. I have a burning sense that Sprint will continue to go up a great deal on Friday, so I’m holding tight to my shares.
I saw this video the other day on YouTube. It’s sure as hell a promo for Ron Paul and his respective presidential campaign, but it does show legitimate reasons why our economy is unstable.
Promotional crap aside, we are definitely in a state of recession. And the market is bound to “pop” someday or another, maybe in a few weeks, or maybe not at all. The Fed is working hard to attempt to curb the downward trend of the US economy, and I have a feeling we will pull through.
