Life is a Hard Teacher: Failing to have an exit strategy

Life is a Hard Teacher: Failing to Have an Exit Strategy

I can tell you a specific thing I learned early on when I started buying stocks. I had $550 in my account..not much I know...so I bought 1 stock, 100 shares at $1.90 a share. Just 3 hours later it dipped to $1.80 a share..so I bought another 100 shares.
The next day I bought another company at $2.15 a share, 50 shares.
Later that day I bought a OTC stock for .04 a share/100 shares.

By the time I did these few transactions I had 400 shares of stock, but guess what? I had $5.76 in trading cash left. So what happened was my first stock tanked down to $1.60 a share and I couldn't get out because I didn't have enough cash to put a stop limit on it nor outright sell at a small loss. My second stock went up to $2.75 a share and I couldn't sell for a profit because I couldn't afford the trading commission.

Moral of the story as specifically related to the stock market:

1) Don't buy more of a stock going down...you're throwing money into what is likely a sinking ship.

2) Never buy so much stock that you can't afford trade commisssions.

I took that knowledge and became a slightly better stock trader with it.

Moral of the story as an overall lesson about financial planning:

1) Always know what your costs are going to be.

2) Always leave the exit available, open and know when you want to get out.

3) Follow your strategy!

All the best to you!
Sincerely,
Bill White
President/CEO
The Biggest Deal, Inc.

http://www.thebiggestdeal.com