I Lost $400 My First Day Trading

Meir Barak  |

Only fifteen years ago, I was still a diligent hi-tech employee with no clue about the markets. All I knew was that loads of money shifted there, and I was determined to get my hands on some of it.

My first problem, which everyone wishing to succeed must face, was: should I give up my salary?  Should I take the risk, leave my job, and try a new direction? Only a very few are prepared to do that, but I understood that if I were to realize my dream, I had to take that risk.

Back then, I thought stock trading would be child’s play. I opened an account with a broker (I'll explain how and why later) and innocently believed I’d succeed through a simple method: buy cheap and sell high. How did that first year end? With a loss, of course. Now, twelve years later, I know I was clueless, lacked experience, and was somewhat arrogant. In short, I was ripe prey for the pros. It took me a long time to discover that behind every stock market deal are two sides: the pro and the idiot. On my first day – and for the better part of the first year – I usually filled the role of the latter.

Score: 1-0 for the Market

On the day I opened my first trading account, I rushed to buy 1000 stocks of TEVA Pharmaceutical Industries (TEVA) . My very first trade! I was so excited. I remember my pulse hammering away. The whole thing was a rush. I didn’t see or hear anything else around me, I was so thrilled. The outside world just seemed to disappear. There was a cone of silence, inhabited only by me and my stocks. 

I was glued to the computer screen, counting anxiously, watching every movement of every cent. Suddenly, when the stock went up ten cents, I got scared it would drop down again, and I pressed the sell button. Idiot! TEVA climbed $1.50 over several hours. A potential profit of $1500 ended up being a mere $100. Never mind. Not so terrible for a first transaction. I convinced myself that I was pleased as could be.

Then, suddenly, doubt rose in my mind: did the sell order really go through? I knew I’d hit the sell button, so why did the trading platform still show those 1000 stocks in my account? To be on the safe side, I hit the sell button a second time. Whew! Now it indeed seemed like I’d succeeded. My heart rate slowly returned to normal, and I took a drink of cool water. Three minutes of effort, and a profit of $100. What a financial genius I was! Not bad at all for my first effort as a trader. Or so I thought…

I Discovered Stock Shorting…the Hard Way

I celebrated my success and opened the trading platform again an hour later. To my horror, I discovered my account showing a loss of $400 caused by a “short trade” of 1000 shares. What on earth was a “short”?  From the little I knew, a short was a method for profiting from a dropping stock. What I couldn’t figure out was how the devil I got into this, and how to get out of it. Meantime, TEVA continued to move up like a rocket shooting for the moon, and for every cent it climbed, $10 was being wiped from my account! 

I did know that being in a short with a stock running up is not a good idea at all. Pressure, sweat, a day’s salary gone in an hour, TEVA not stopping to breathe for even a moment, and my trading account evaporating before my eyes!  What should I do next?

I phoned the broker’s client service center. After some nerve-wracking Muzak-filled minutes, my answer came through. Apparently, to exit a short of 1000 shares I needed to buy 1000 shares. I bought and closed the platform. What a relief. Later I understood the sequence of events: when I had sold the first time around, the trade platform had not updated immediately, making me think the sale hadn’t gone through. But it had; so that when I pressed the sale button again, I was actually telling the system, “I’ve just sold 1000 shares I don’t have.” That put my account into a “short.” But don’t worry, we’ll learn what that is later in the book. 

My first day of trade ended in burning failure. Score: 1-0 for the market.

A Perilous Uphill Battle

Call me persistent, call me stubborn, but I wouldn’t give in. I continued buying, selling, and losing for almost an entire year. As time passed, more and more questions surfaced, yet remained unanswered. A year of losses taught me one certain thing: trading is a profession like any other, and like all professions, you need to learn to become successful. I set out looking for help.

To be a stock trader, you don’t need a diploma. Everyone can open an account, trade, and make pointless moves, just like I did. That’s also why most traders fail. I knew there were those who succeeded, however, and I believed I could find ways to become part of that group. I sought them. I found them.

Before the Internet, trading rooms could be found throughout the United States. This is where traders met, working together as professionals. In today’s Internet age, most trading rooms have closed down, and activities have moved to chat rooms which any trader can join for a monthly fee. These rooms are where you can hear professional traders, whom we at Tradenet call “analysts,” discuss trends, listen to their instructions, ask questions and basically trade with them in real time without ever leaving your home. I was so happy to join one of those trading rooms, and immediately felt like I’d come to the right place.

What an amazing world I’d discovered. The analysts bought and sold, in real time, successfully. It seemed my path to success was paved. All I needed to do now was to listen to the analysts and copy their moves. So simple! So why was it so difficult?

Statistics famously tout the figure that 90% of active traders lose money. If you are among them, the solution is simple: do exactly the opposite of what you think. At first I had trouble figuring the upside down logic of the profession. I found that precisely those stock trades I considered risky, if not downright dangerous, revealed themselves as the biggest winners, whereas the ones I would choose and which appeared to be less scary and more reliable, were less successful. Of course, in my early trading history, I chose only those that failed. But over time, I also discovered this tendency was not exclusive to me. 

Learning to Think Like a Trader

It’s very natural for an experienced trader to view the market completely different than a beginner. To succeed, the beginner needs to learn the basic principles, and slowly undergo a psychological revolution.  Because I’d skipped the stage of learning fundamentals and jumped straight into the deep end, I concluded that I needed to understand the market. It was time to “go back to the drawing board” and learn the basics.

The market operates according to known rules. There is no need to invent a new method in order to earn money. Just adopt the existing ones. The stock market operates according to clear rules, I was surprised to learn, and these are known chiefly to the professionals who make their livelihood through trading. It would be too obvious to say that from that day on, my life changed beyond recognition.


To begin your own journey toward financial independence, visit Meir Barak's site Tradenet and check out his book "The Market Whisperer".

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer



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