Quarantine Bad Stocks from Good

In the past month or so I bought 5 stocks. I started after a market rally follow through. Then the market faltered. IBD has put the market condition as "rally under pressure". My accounts started to lose value.

The first big hit came from EW. An analyst downgrade made it down more than 15% in the middle of that day. But it recovered some at the end of the day and closed at the top of the day. The next day it recovered more. Since then it has been mostly flat. I held on.

Then on Monday 8/25 another big down day on the whole market greeted me. DJIA was down 240 points. Another one of my holdings HGR was down more than 10%. It has announced that it'd do another share offering. It closed at almost the bottom of the day. My all stock holdings was showing a $3,200 loss. The next day the market stabilized. But my stocks kept on dropping, all 5 of them. I felt terrible watching the values going down tick by tick. I mustered courage and started to cut. One by one I sold 4 stocks, starting from the one I liked the least. The last one I sold was HGR. I put a limit order at 15.8 which was a nickle under the market but it only got partially filled. I waited for about 15 minutes and when I saw that it still didn't get filled I changed the order and sold the rest at market at 15.68. At the time I am writing this piece it's less than 48 hours after I sold it it's quoting at 17.18. Now I feel stupid that I have fire-sold it.

At that moment I knew that the down turn of HGR might be quick and the recover might come any time. I knew that because I'd seen similar situation happen more than once before. But I was so upset by the relentless dropping of my account. My all 5 holdings were all down that day even the DIJA was up. ALXN has been dropping 9 days in a row. SY is nearing lossing all the gain I had and turning into loss. EW was dropping and PRXL was dropping. HGR is making lower low than the day before. I wanted to vomit. So after I sold out SY before it became a loss for me I was in a roll. I was having this selling momentum. Caution and thinking was out of the window. PRXL was not sold only because I had held it for less than 14 days and my emplyor ITG prohibit me from selling it.

Now the lessons. I have been making progress on overcome the sin of plunging - plunging into a single stock all at once. That happened big first on BIDU back in 2006. I've lost money on CBOT so I plunged in BIDU trying to get even quickly. I sold out at a loss because the big position is hard to hold emotionally. Then it happened again in IMMR in 2007. This time I was lucky and made money. And then on DAR. I panicked and sold out at a big loss just to see it turned back and made big up move without me. I learnt my lesson and decided to limit my position in any single stock and also decided to only gradually build up the full position in any single stock as it moves up.

That was a big step forward but 2 days ago I made the opposite mistake of plunging out of all stocks without differentiating the situations they are in. I will learn to control my emotions so I can act more rationally when deciding to sell stocks. Remember to decide one by one, case by case. Don't get into a selling rampage.

The second lesson is that I should learn to tolerate day to day fluctuation of stock prices. It's good that I have lots of money now. The problem that brings is that with a few percentage move of the holdings my account would move by thousands of dollars. To improve my tolerance, I should keep the big picture in mind. Also I need to stop looking at stock movement tick by tick. Maybe a coupld of times a day is fine. But tick by tick will make me insane.