Stock Market Crash

So, the stock market has crashed big time. It sure is a surprise to see your portfolio shrink by 10% in one day! I've always said that the stock market will, at worst, drop down by 60%. I believe that most stocks are at that levels. I'm into buying mode right now. Just call me a contrarian. I'm waiting for an uptick before I buy, though.

It has been an expensive lesson so far, but at least I'm learning. Specifically, I'm learning about Dollar Cost Averaging. It appears that one stock was overpriced. Now that I know better, I wouldn't have bought it at that level. I was rather upset that I had to learn this the hard way. Oh, well. At least I'm learning. Had this been a professionally managed portfolio, I'm sure he'll be giving a lot of excuses, and not learn anything. This is why I managed my own portfolio.

I'm learning resistance levels, and give my pattern-recognition brain section a good healthy workout. The last resistance level was at $8.50-$9.00. I set the limit at $8.50, but after analyzing it on the weekend, I decided to up it to $9.00. I should've waited until Tuesday to do it. I knew this. I ignored it because I don't have time to do it. I could've saved 25 cents per share. That will be the last time I followed my emotion, instead of logical thinking. Lesson learned.

Imagine my surprise that the stock market took a big dive. It went through 2 limit levels already, and I haven't done a thing! I'm going to fortify my positions for a while, and maybe I can find some good bargain to boot. Microsoft looks good. I will research the limits and STICK TO IT!

It annoys me very much that my investment time period is once per month, and this happens. When prices went up, I couldn't cash in, even though I know I should have. Then prices took a dive, and the only thing I can do is buy more, since I can't sell anything less than 30 days period. Lesson learned: Set aside short-term stocks to take advantage of quick profit.

A very important lesson learned: DON'T BE GREEDY!
Always there is a balance in something. That means lower and upper limits. People are being naive if they think if something is good, then more is better. That's not true. Even good medicine can be harmful in large quantities, while poison can be useful in small quantities. It's all about range and boundaries, instead of just the bottom line. There is such a thing called "capacity" and if it's nearly full, then watch out! It may just tumble over! I used to think that people who took profit when stock price doubled just to be safe as stupid, losing all those opportunities. Not anymore. Safety is number 1 concern. Find your limits, both upper and lower.

One more thing: If you haven't been playing with stocks, consider yourself lucky. Start on paper, so that mistakes are cheap. I suggest TRMP, Donald Trump's stock. You can download historical data on it, and go through it. Yahoo Finance has a historical data section. Download the weekly data, and follow the adjusted close prices (This ignores splits). Just load it into the spreadsheet as csv (comma separated values), sort the data by dates, and zoom the view. Then, look at the price at the bottom. Decide whether or not you'd buy and how much. Don't forget to add $20 per trade as broker fee. Then shift the cursor down one time, so the prices scrolled up one line. That's the next week. THAT is the price you use to transact your order. This way, you can't cheat by buy low/sell high based on a sure thing. Repeat until end of data, buying and selling as desired. Maybe you want to limit yourself to $500 budget every 4 weeks, just to make it real. Let's see if you can make money off that stock. If so, then congratulations! Try again with your favorite stocks. Do it with your friends, just for fun. See who has the Midas Touch!

If the stock has dividend, decide whether you want DRIP (Dividend ReInvestment Program) or just cash it out, and keep going to the next price. Meanwhile, keep track of prices of about 100 of your favorite stocks on newspaper. Then see if you can just as well trading in "real time". Now would be a good start. Anybody can make money in a bull (rising) market just by buying an index. It takes true skill to make money in a recession, and that is the mark of a true master.