I bought my first stock one week after I turned eighteen. I walked into a Dean Whitter office at my local Sears, and bought 300 shares of Altos Corporation. They did something with computers, I think. I knew their stock was going to go crazy because some guy on the local cable access show said it would.
Over the next 20 years I continued to trade stocks, while at the same time building a successful business in a non-financial related field. In 2004 I decided to sell my company and trade full time. I loved trading, and had been consistently profitable in the previous two decades, so the transition would be easy I figured. I was wrong.
One day I was on my way to my mother-in-law’s house to drop off my then infant daughter. My mother-in-law would watch her during the day while my wife was at work, and I built my trading empire. I was winking at my daughter, listening to the radio, and smugly thinking about how good I had it. I was a “trader”, and was enjoying everything that came with that regal title.
You know what I mean. Roll out of bed a few minutes before the open, if you wanted. Trade for a couple hours, if you wanted. Take off in the middle of the day, if you wanted. What freedom! Woe unto those chained to a desk, working their 9 to 5 Dilbert-esque jobs. I had it made.
Unfortunately I had no idea what was about to happen to my perfect world.
I had been building a very large position in CELL, some company that did something with old cell phones in Latin America, I think. This stock was ready to explode. I knew that because some guy on the Yahoo Message boards had been telling everybody for a few weeks now. Now when I say a “very large” position, what I mean is outsized, as in double the size of my trading account. I mean that is what margin is for, right?
CELL was going to announce their stellar earnings after the bell, and I was giddy with thoughts of the things I was going to buy with my profits. As I drove I used my cell phone to check up on the current price. It was still early morning so I didn’t expect to see much movement. Every minute or two I would hit “refresh” to see what was happening (this was pre-smart phones). It went like this;
Refresh: CELL 31.79 +.15 +.50%
Refresh: CELL 31.82 +.18 +.53%
Refresh: CELL 31.75 +.11 +.47%
Refresh: CELL 28.79 -2.85 -9.33%
Refresh: CELL 27.84 -3.80 -12.18%
Bad tick right…???
Refresh: CELL 26.98 -4.68 -14.83%
This is not funny..!!!
The mother of all douche chills hit me as I realized I was exactly equidistant between my house and my mother-in-law’s, and had no way to find out what was going on, let alone get out of the trade.
You see, the large, well known retail broker I was checking prices from with my phone was “un-cool”. I had opened an account there with a token $100 so I could have access to mobile data. My trading account was with another “cooler” broker. They were too cool to have mobile access. And I was too cool to have their phone number or my account number programmed into my phone.
Hell, my mother-in-law didn’t even have a computer, so there was no relief when I got to her house.
The upshot is that for some reason, CELL’s earnings came out 4 hours too early. Were they leaked or was it a mistake, really at that point it just didn’t matter, as my account was already down 30%. Fortunately, I held my position for the inevitable bounce that never came, and peeled off another 10% in the next couple days.
The most disturbing thing about this whole incident was not the money I lost. It was the shattering of the illusion that I had any idea of what I was doing. In my head I was still trading part-time, like I had all those years that I owned my business. Only now I no longer had that business (income) to fall back on. This was it. I had gone out on the high-wire with no safety net, and took a near fatal fall. Would I be able to pick myself up and recover? Could I make it trading? Because, for some reason that thought had never entered my mind, as I assumed that I would be profitable from day one forward. It was a scary place to be, and one I was not comfortable being in.
Anyway, I think they sold used cell phones in Latin America.
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