the know-nothing investor

I had almost everything to start and the last step was to find a broker. In Portugal there is not much to choose from and commissions are almost the same between brokers. So I chosed an international broker with confirmed credits that was operating in Portugal for a few year

I also must say that, subliminar or not, I went for the one with the most appealing presentation. Is incredible how much decision we make everyday based on what matters the less.

After I opened the account I was really glad with myself. I was taking risks like an entrepreneur does when he starts his business. That made me feel very grown-up.

When I saw 10000 USD deposit in the account I was so eager to start I forgot a lot of my strategy. Of course I looked at some charts for identifying some trends, but I didn’t use the same setups that I had used in backtesting or even looked at screeners to find stocks based in my predefined parameters.

In fact I bought 9 different equity shares, 7 longs and 2 shorts, in the same day and I didn’t even care if they were near a new higher high and probably heading for a market correction.

I thought as long term trader it would not matter, but this was an excuse to be immediately part of the game. I could not control myself and I was not able to make a good market-entry timing. At that time I didn’t even notice.

Even stock picking was so bias, I chose basically blue chips that I am used to. Is incredible how I didn’t see it. I bought Visa, Mcdonald’s, Ebay, Starbucks, Unilever, Royal Dutch Shell, etc., companies that make part of my daily live. Why I didn’t I buy shares of a company that I’ve never heard before? I guess we tend to choose what we know best, it represents comfort and reliability. But what have these two adjectives to do with buying or selling shares? Nothing, I must say…

I was starting to accumulate really big mistakes, but I was still convinced that I was at the top of my game. Basically because in the two first month of trading I had a possible profit of 5% of my total account. I remembered thinking how could be that easy? Silly me…

Then Mr. Market when for a correction and I saw my virtual profit come down to 0% again. I tried to convince myself  “this is just a phase, as it went down will go up again”. At this time I was starting to doubt my trading system. I was accusing some pressure and I decided to talk to my wife about my wonderings.

Even though my wife was very supportive from the beginning, she is a bit sceptical about the risk involved in trading which is good to keep my feet in solid ground and it makes me more cautious avoiding failure – failure is always present you can only try to fail less.  So when I approached her to share my feelings I started telling her that my account had had an increase in its value of  500 USD in just two months, but now we were in a corrective phase and the account was back to square one. I still can remember her words “It doesn’t look a great deal of a system! Why didn’t you sell when you were making money?”

Those words really affected me. Now, I know why but by then I thought she had a point and I was starting to wonder if I was doing it right.