Tuesday, January 25, 2011

Losing can be winning

Today I lost about $185 on a daytrade and it was easily one of my best trades of the day.   Someone I follow likes HTCH which I did some research and I liked it as well.  I traded it a few months ago and made some money. 

I bought a little HTCH on Monday and then today, I added a little more... it was holding the 50 day moving avg. and I knew they were reporting after the close today.  However, about half an hour later, I got a bad feeling.  The stock was now trading below the 50 day MA and I realized, looking at the chart, the stock was being dumped right into the earnings report.  The more I looked, I quickly realized that someone must know the results of the upcoming earnings report and they were terrible. 

I didn't hesistate.  I quickly sold my shares and took a loss.  About 5 minutes later HTCH was trading even lower.  The stock was weak all day and finally, after hours, the results were released.  A total miss.  HTCH gapped down almost 10% from my sell price - saving me at least $600 in losses.  This was a good read.  I was looking at the HTCH  yahoo! board where one poster said he added more because it was now a lot cheaper.  I used to do that too.  Adding to losers is a natural instinct but it rarely pays.  The earnings report stunk.  So why should the stock move up any time soon.  

Being impatient with losers requires practice.  And a willingness to admit you were wrong.  It's okay to be wrong.  As long as you don't end up really wrong, you can survive to fight the next day.

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