3 Strikes and I am out!

1st Strike:

7-15-08: I shorted 4000 shares of FHN for $21,892.37. The day started out negative for financial. The overall trend was downward for most financial so I thought shorting financial was a
safe bet. Never did I thought the market would change so quickly.



I was actually correct that the stock would fall. What I didn't anticipate was the sharp increase. When it hit $5.43, I was tempted to buy back the shares but it quickly moved back to $5.45 range. In less than two minutes later the stock moved passed $5.47 and I still held. Stubborn me! The trend of the stock was upward as of 10:15am. Stubborn me kept my shorts hoping for a fluke. In the market, never hope. Hope never works. I waited till I was hit with a margin call. By then it was the 17th of July and the buy back price was at $7.99.




The final tally including commissions came out to be: -$10,099.75

It feels like I have learned nothing after all the trades I have made since Jan of '08. I knew it was an up trend but I was stubborn. To look back on this trade the lessons I learned:

1) "Trend" is your friend when you are on the right side. If a stock looks to go up then buy not sell short. I should have left around $5.75 at the end of the first day with a buy back on the stock. I would have only lost approximately $1150. I was naive and stupid to stay with it and took a big hit. Do not fight the trend, as a meager player I will never win.

2) "Quality not quantity" the downward trend on the day I shorted the stock seemed to accelerate. So I made a huge risk in shorting the stock. I spend over 50% of my assets on that one trade. Only to anticipate a meager $0.05 to $0.10 per a share profit. The trade really wasn't worth it for the money I was risking. All in all if I had shorted 1000 instead of 4000 shares I would have only risked about 13% of my assets and lost approximately $2750 if I bought back at $7.99.

This trade is my largest single trade lost to date. The next two mistakes were much more heart wrenching. I will continue tomorrow on strike 2 of my three dreadful mistakes in a row.