Attempting to see through the hype and figure out what investment strategies actually work

I just looked at my trading journal from the last couple of months of trading mostly penny stocks and specifically the losses. I’m definitely in the 90% camp (90% of all traders lose money in the stock market) at this point. It was a bit discouraging until I looked at my losses and made one change.

I changed all my losses bigger than $200 to only $200. That turned things around giving me nearly a 50% profit on my starting investment pool of $5,000. Of course I can’t go back to change anything, BUT, this emphasizes probably the most valuable lesson I think any trader can learn.

TAKE LOSSES QUICKLY

Gotta cut them short and head into each trade knowing how much you’re willing to lose. I got bit hard by SEED not following this advice that has been pounded into my head over and over by Timothy Sykes among others. In fact, with SEED, I was actually in the red before that turned around, I got squeezed big time and lost $3,000 before I finally pulled the plug and called the Time Of Death on my trade.

Tomorrow as I start a new chapter in my trading life, I’m working to no lose more than $200 on any trade. If that was the only thing I changed, in theory, I would be a profitable trader joining the ranks of the small slice of traders that actually make money trading on a consistent basis.

I first came across Timothy Sykes about 6 months ago on some blog post about making money online. I read about how he had turned $12,415 of Bar Mitzvah gift money into $1.65 million trading stocks from 1999 to 2002. In 2007, he decided to give it another go and prove he could repeat his rags to riches feat.

I bought into the hype, of course, and subscribed to receive his Tim Alerts letting me know what plays he saw coming each day and what moves he made. Finally after watching one of his Friday Livestock broadcasts on the Internet, I decided to see if I could actually make a go of what he was teaching and ordered up his Pennystocking DVD course. I didn’t know it came with his book (I had no idea he even had a book published).

When I cracked open the package, I really didn’t think much of the book. To be honest, I thought it looked a little cheesy and I had no interest in hedge funds. For some reason, though I picked it up and started reading. I was hooked by the end of the first chapter.

Now I buy quite a few books, but I don’t tend to read too many of them. All part of my information collector problem. So it’s rare that I have a book I can’t put down, but I literally could NOT put this down. I read the whole thing in a few days, staying up until 1am and 2am reading.

His recount of the early days of his trading career and some of the huge plays he made was awe striking and inspiring. I couldn’t believe that a high schooler could be so resourceful and driven to learn as much as Tim did in such a short period of time.

The “How much did Tim make today?” game with his college roommate and making $123,000 on a trade which, because of slow executions neted him an extra $10,000 almost seem to good to be true. Then to hear him recount his story about starting his hedge fund and the roller coaster ride was very interesting as well.

Although a lot of people mention disappointment or wanting more out of the book, I was pleasantly surprised and will not hesitate to recommend Tim’s book to anyone interested in investing. I found it funny, inspiring and full of little “don’t repeat my mistakes” principles hidden throughout.

Order the book from Amazon here:
An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund

I’ve thought a lot about how to best approach this blog and helping ensure I’ll actually get off my butt and do something (Goal #1: See About IH post). My initial thought is to choose two to three strategies or investment methods to apply to different accounts. This will allow me to try different things simultaneously, while also providing a little more benefit to others by offering strategies that fit different styles and personal interest.

Also, I have run across a couple of strategies that I don’t feel super comfortable with, but I’m interested in trying because of the technology they utilize. I’d like to always have at least one more conservative method or account that represents a more traditional approach to investing.

I was thinking about starting with $1000 in each of 3 different accounts and tracking the following broad things on a frequent (possibly daily where appropriate) basis:

• Current account balance
• Up to date profits and/or losses
• Amount of time spent employing the investment method
• General feelings about the strategy overall

I’m happy to consider alternatives to this style if anyone wants to weigh in. I’d also be interested in hearing what others are trying or would like to see tried on this blog.

Hello, my name is Ryan and I’m a hype addict. I’m literally a sucker for hype. I get hyped up when people talk about how much money they make online. I buy into the hype of untold riches with little to no work every day (I probably should mention I like taking the path of least resistance whenever possible). The hype of investing and how much money people make in the stock market also gets me. Add to that my tendency to be an information collector with little to no action and I’m a walking recipe for disaster.

This blog is serving several purposes for me:

1. To provide some accountability for my resolve to TAKE ACTION. I don’t want to be an information collector any longer. I want to take advantage of my enjoyment of tinkering and learning as I go.
2. To chronicle my real world experiences as I learn about investing, figure out what methodologies work for me, and evaluate what hype is actually valid and what isn’t.
3. To provide something that is hopefully valuable to others and encourage them to take action along with me.

Worth mentioning is a little background about myself. I’m not a rich guy and I know less than many about investing. I was a Junior High youth pastor for almost 10 years before starting an IT business that birthed a web development and hosting business a couple of years later. I’m still involved in both.

I’ve always liked the idea of investing money and the stock market in general. I remember walking into a day trading office about 8 or 9 years ago and seeing all these dual monitor setups spread all over the place with lots of charts, numbers and graphs moving all around on each monitor and becoming giddy with excitement at the thought of day trading.

So far though, I’ve not done more than trade a few times through a couple of online accounts, made a little money, lost a little more money than I made, and read some books on investing. So anything I chronicle on this site will be my real world results and thoughts from a novice investor. Take it as such.