Quote from acesup:
I am currently 44 yrs old and have been online trading since early 1997. From 1998-2000 I made over $20 million from starting with a $25k trading account. Today my trading account is down to $400k. Here is my true story. Readers digest version.
In early 1997 I was selling life insurance part-time and playing poker for a living. One day my wife comes home with a stock tip and I begin to seek out how I can buy this stock. I search on the internet and open an account with TD Bank (I lived and still live in the Toronto area) and do the trade through their online investment centre called Webtrader I recall. Slow as molasses.
Needless to say this penny stock tip did not work out but the idea of trading stocks from home online caught my interest. It was virtually online gambling for me. To keep it short I did some research and discovered Datek, a much more efficient and faster online broker.
I deposited $25k with Datek, began reading all I could on the market, and was off to the races. Before long I was down to $5,700 before I figured out how to beat the game. It was my discovery of shortselling that lead to my riches.
I began shortselling highly overbought stocks to great success. The secret was all in the timing as well as having no fear when the trade went against you and averaging up as I always new they would come back to below my average price for the gain.
My account began growing rapidly as I was virtually parlaying everything into every trade and as my account crossed the $150k barrier I would start to diversify and often have more than one short going at a time.
Once my Datek account hit $250k I got nervous about having all that money in one place and opened a retail account with a Canadian Bank.
It took me roughly 12 months to hit the million dollar mark before I had my first big scare. I got squeezed in a stock identified as TUNE one morning. It was one of those shorts I misstimed and got in a little too early and had to average up twice on. My greed got the better of me and I kept hammering at it one morning via my retail account. If you remember those days it wasn't uncommon to see stocks run from $12 to $50 over a few days. This was one of them. At one point in the morning as TUNE was running up to its blowoff top I had to step back from my computer and go lay down. I was scared and in shock.
I had calculated that on paper I had lost my million and was in the hole approx another 7-8 million dollars if TUNE was to close at that time which was near the high of the day . My broker was numb as well and was worried compliance might buy me in. Things moved so fast that morning they never did find out my dangerous predicament. If I recall correctly I needed TUNE to come off and close some $13 from the intraday high for me to have any equity left to begin the next trading day or I was wiped out. Needless to say TUNE corrected somewhat and left me with $300k to rebuild on.
Over the next 2 years I was able to grow my trading accounts (I was up to 1 online and 2 retail accts) up to over $20 million combined. Along the way I had a few scares where I was set back anywhere from $500k-$1mil but nothing that I couldn't handle. At my peak I was averaging $300-400k per weak. It was sick.
One humourous story was when I opened up an Etrade Canada account to try them out. I deposited $250K to start and immediately got squezzed on a Bid.com short with them. My account wasn't 2 weeks old when my starting short position went against me at Etrade and I had a margin call for $800k. I said to the broker on the phone that I would courier a cheque down that day. The gentleman from Etrade was obviously nervous and requested he drive up to my home and pick up the cheque himself right away. He did and then rushed to my bank to certify it. I closed my account a few days later as Etrade was uncomfortable with my action.
It was early 2001 when my gig was up. The market topped out and the days of stocks gaining 300-400% over a few days were few and far between. Still I thought that I was invicable and began looking for the new key to the market. I thought I could write options but that didn't work. I tried picking bottoms but my hands were bleeding from all those falling knives.
Two years later I had given back over $12million of my gains with no end in sight. I couldn't beat the game anymore. In my heyday I did take out a few million and invested in a number of ventures, all of which didn't pan out. In 2000 I got divorced and gave my exwife a few million. As it turns out that was the best investment as her investment advisor has grown those funds so as to take care of her and my son forever. She and I are both remarried by the way.
The summer of 2004 I quit trading to persue another interest. It didn't pan out but it did allow me to step away from the market for a year to refresh and clear my trading thoughts.
This past June I reopened my Datek now Ameritrade account and will be looking at Questrade this week. I am now starting with $400k and hoping to find my new edge or key to the market.
The time off has allowed me to regroup and learn to appreciate a trade where only a few k is gained. I have a few ideas that are working nicely for me right now. Though I realize I will never be able to make those astronomical gains from the past since the market and it's volitility have changed. I do believe and have the renewed confidence that I can double my $400k account this year. Time will tell.
Why do I tell this story? Just for my own wellbeing but also to have in writing a few of my lessons learned.
1) Never believe you are invincable
2) Remember the old saying that " when you think you have the key to the market be prepared for the locks to get changed on you."
3) When your trading system begins to fail do not get stubborn and press it. Best to sit back and take a break and rework a new strategy.
