A young trader learns the hard way
July 15th 2006 16:17
The stock market has always fascinated me since I was a kid. I could babble out those stock market jargons like warrants, margins, shares and etc... but without understanding how it works although I knew people could make alot or lose all thier money from it. Just another gambling of sorts. The golden years of Malaysian stock market, where I grew up, had me mesmerized that it was a wonderful money making machine. Then came the 1997 Asian Financial Crisis brought home financial disasters had me understand the concept of risk through a hard way.
Those periods changed my family and my life. The stock market was no a longer a topic of daily conversation until I turned 18, my first stock trading account was opened. At that time, I had basic understanding of the stock market functions and nothing deeper. I picked stocks out of my own sentiments. More like throwing a dice, without any serious research or even consulting my broker. Feeling euphoric that I could trade yet I was chicken, having bought a few stocks across different stocks but at a miniscule amount of 1 to 5 lots (1 lot = 100 units). My porfolio currently composed of 3 stocks; technology, general trading and property development. So far, the best bet I had was the 100 dollars I made from trading from the same technology stock I still hold today. At this point of time, my portfolio lost over 35% of its original value.
In Behavioral Finance, my action is described as Prospect or Loss-Aversion Theory which defines investors often hold on to losers and sell thier winners. With my portfolio value wiped off, I am still clinging onto it because Im holding paper loss at the moment and hoping, albeit a distant dream, that my stocks would shoot up to at least recover the original value or even make some decent profits.
From my experience, don't ever dive into the stock market without doing any concrete preparation and most of all, establish a goal, set a limit and don't simply let emotions or herd mentality into you.
Those periods changed my family and my life. The stock market was no a longer a topic of daily conversation until I turned 18, my first stock trading account was opened. At that time, I had basic understanding of the stock market functions and nothing deeper. I picked stocks out of my own sentiments. More like throwing a dice, without any serious research or even consulting my broker. Feeling euphoric that I could trade yet I was chicken, having bought a few stocks across different stocks but at a miniscule amount of 1 to 5 lots (1 lot = 100 units). My porfolio currently composed of 3 stocks; technology, general trading and property development. So far, the best bet I had was the 100 dollars I made from trading from the same technology stock I still hold today. At this point of time, my portfolio lost over 35% of its original value.
In Behavioral Finance, my action is described as Prospect or Loss-Aversion Theory which defines investors often hold on to losers and sell thier winners. With my portfolio value wiped off, I am still clinging onto it because Im holding paper loss at the moment and hoping, albeit a distant dream, that my stocks would shoot up to at least recover the original value or even make some decent profits.
From my experience, don't ever dive into the stock market without doing any concrete preparation and most of all, establish a goal, set a limit and don't simply let emotions or herd mentality into you.
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