Minimizing Risk Still Has Risk

 

As always, let me preface by saying that this is not investment advice, but this is a blog about my investment strategy and journey in trading stocks. 

 

“Hindsight is 20/20.”  “It’s easy to be a Monday morning quarterback.”  “Woulda, coulda, shoulda…”

These are all phrases that make me think of this week in stocks.  Currently I am at a wash for June.  Last Friday I was sitting at 219% ROI, but today I am back down to 203%.  I am locked into RAIL over the weekend, and the way I see it, possibly for the next week.  It doesn’t fit my overall strategy, but I do not like actually losing money, and if the trendline looks like it will recover, then it is better to stay in than jump out. 

 

The fundamentals for RAIL were pretty good, but I wasn’t finding any stocks that really stuck out to me as better than another.  Also, if it wasn’t for my 1.7% greed, I would have sold it on Thursday.  I know – 1.7% doesn’t sound like a lot, but it was a costly choice that locked me into this stock until it pulls out.

 

I bought in on Tuesday at 5.53 and I decided to set my sell price price for 5.79 (4.7% profit), and I remember when it hit 5.71.  I questioned whether or not I should sell then at a 3.2% ROI.  It was decent, but then it dropped to 5.69 and my enthusiasm won out over the logic of the trade.  The fundamentals were there saying this was a declining stock, and that I should jump out with any profit, but I stayed in hoping to break 5.71.  So the next day I reset my target to 5.72.  It hit 5.69, and again I thought maybe I should sell with a 2.9% profit.  I had already violated part of my trading strategy, which states “buy one day, sell the next.”  But even though I was in the green it felt wrong.  I wanted more.  Maybe this is a bit like something I never do – gambling.  Even if my trading strategy minimizes risk, there is still risk.  And violating the strategy is kind of like driving off the road and into the desert.  You get deep enough into it and you have to use your boy-scout skills to re-orient yourself so you can get back to the road.  Hate to say it, but I even remember when I could have sold at 5.53 and just broke even. 

It’s not like I’m trading all day.  I set alerts that tell me when the stock price hits different prices.  It would have been nothing to go in and change it – set it and forget it.  After market close on Thursday, I changed my ask price to 5.53.  I sold 1 share in the premarket, and then it pretty much tanked all day Friday to close at 5.36. 

Now I’m at a fork in the road.  The decline could either stop at 5.12 or 4.61, and then have a sharp reversal so that I’m green again in a week.  I’m hoping for it to rebound quickly and if it does, I will probably reset my ask price once again to make a 3% profit.  I know – kinda cringey.  “Glutton for punishment” is another phrase that comes to mind.  That fork in the road I was talking about looks less kind.  If the price goes below 4.61, that would be less like getting lost in the desert and more like getting lost in space.  Then I have to weigh do I actually take a loss, or just sit in time out until it recovers which could be a VERY long time.  From 9/23/19-3/15/21, the RAIL stock price never went above 5.00 and it mostly hovered below 3.00.  

We’ll see how it goes, but history can be a great teacher as well as a schoolyard bully.  Woulda, coulda, shoulda.  For posterity sake, I’ll report how it went next week.  Be careful out there in Wallstreet world.  And whatever your trading strategy is, use your head not your heart to make logical trades.

-Johnie