BOOM! 60% Loss in One Day

 

Photo by David Monje on Unsplash

Dear Readers,

Thank you for coming here!

I guess the more serious post about investing has to wait again.

I would like to share with you in this post about one of my speculations that resulted in 60% in one day.

WPG

I thought this one is worth a shot, given its current pricing and trends. I know they are debt heavy, but it seems that they can hold.

So I entered last Friday.

And it decided to file for bankruptcy under Chapter 11. 

It was my first time encountering this situation and I was quite nervous about losing all my investment.

So I went on to read about Chapter 11.

It seemed not that bad: it is restructuring with some protection period for the company from the debt collectors.

And I found out that GM was once in this situation as well. 

So I made up my mind: it will probably not actually go bankrupt but I may need to wait for the restructuring to be completed.

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Surprise

Yesterday afternoon, when I saw that the stock was halted in the pre-market, I just assumed that the trading will not resume until the restructuring was completed.

Feeling not happy and still a bit nervous, I took my mind off by doing something else.

And then, all of a sudden, I received a notification that my positions were sold at 60% loss.

Until then, I realized:

1. The trading was still ongoing. It was only halted in the pre-market
2. I forgot about my “Stop-Loss” order, which I always do in this kind of trading and which is supposed to be a good habit.

And pain and remorse and anger about myself filled my mind, as I watched the stock regaining its ground rapidly. 

When I woke up this morning, I saw the peak of the price yesterday was almost at my “Stop-Loss” price, which is about 10% loss.

10% vs 60%!

You can imagine how I feel now…

Photo by Mike Labrum on Unsplash

Summary

So I learned 3 lessons:

1. Get to the most basic aspect. Growth potential should only be based on the strong foundation that the company wont be bankrupt.
2. Know the facts. Be really clear on different arrangements. If I knew the trading will resume, I will probably remember to cancel my “Stop-Loss” order, especially when I was ready to wait.
3. Never hold heavy positions in speculation. I wished I bought more on that 44% gain and I was certainly relieved that I did not buy that much for this 60% loss.

Photo by Steve Johnson on Unsplash

A little bit extra

This also got me thinking that speculation does not really make much sense, logically.

First, speculation does come with time, energy and emotional costs. 

Second, we cannot go in with heavy positions, which means the absolute gain wont be significant enough no matter how good the percentage is. 

Of course, it can accumulate, but it also means we have to keep investing our time, energy and experiencing emotional roller coasters.

Therefore, logically it does not make much sense.

And, I knew that long ago…

So I think I will still continue for a bit and see how.

Hahaha…Who can say we humans are rational.

And the economics, which is based on the assumption that we are rational, is certainly not without questions.

If economics is like that, then finance and stock markets can only be so much more so.

Till next time!