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How I Lost $33,000 in Less Than 30 Seconds--Know Your Limits
Most lessons in life are learned the hard way. As kids, we need to burn our hand on the oven, stick a fork in the electrical outlet, and slip while running on the swimming pool deck to make our parents warnings real. As adults, the same principle applies. Our actions have consequences, and many times we must learn the hard way instead of taking advice. On January 22nd, I learned the hard way about the importance of using limit prices.
ALWAYS use a limit price when placing your orders, especially after hours. I cannot emphasize this enough. For those that don't know, a limit price allows you to set the price of a buy or a sell. If the price doesn't reach your limit, the trade doesn't happen. Using limit prices can help with buying entry points and selling exit points, but it also can protect you from a freak of nature. What I am about to tell you is the product of my own laziness coupled with a strange occurrence and a flaw in the Marketocracy trading system. It all added up to the perfect storm, and what a storm indeed.
Since January 4th, I have been trading like a madman testing different strategies. On the morning of the 22nd, before the markets opened, I placed an order for 100 shares of RXD, Proshares Ultra Short Health Care ETF, and thought nothing of it. A position in RXD is part of my long term strategy, and with the price starting to rise from the mid-high 60's into the low 70's, I wanted to increase my position since I think it has some room to run. Previous to this, I had been accumulating a large cash position, around 160,000 at the time. I placed the order, along with others, and then went to work.
Continue reading "How I Lost $33,000 in Less Than 30 Seconds--Know Your Limits"
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