Beginner Investing: Learning From Mistakes

When I was a beginner investing in the stock market, I had a lot to learn. Just like most people starting out trading stocks, you will make more mistakes than you would like to, but that’s the nature of the beast.

It’s no different than a child who is growing up and learning about life. When you are new to something, it’s expected that you will make mistakes. The important thing about it is that you learn from those mistakes and move forward. One quote that I keep in mind every time I trade stocks is “Knowledge Is Power”. Knowledge is one thing that no one can take away from you. Once you know it, it’s a tool to be used again and again, throughout your life.

What you do after you’ve made a mistake is just as important as learning from that mistake.

Let me tell you about my very first trade. I was trying to place an order with TD Ameritrade for 1000 share of a beverage company that had a earnings report coming out the following day. After I clicked on the confirm button, I waited for the transaction to go though. About a minute later the screen change and informed me that my order “timed out”. I didn’t know what had happened. My mentor and I decided that I should place the order again. I went through the steps again and wait for the confirmation, but again the order “timed out”. I went to my portfolio page and according to the page, my balance was zero. Needless to say I went ahead and for the third time, placed the order, only to have it time out one more time.

My first mistake was that I didn’t call the customer service number to check out what the status was after the first attempt. The second mistake was not to call customer service when it happened again.

One would think that after three attempts to place the order, I would have wised up and called. Yes, you would think that but I proceeded to do it again for the fourth time. When it timed out on that attempt, I finally called to find out what had happened.

The customer service representative informed me that each time that I placed the order it was filled. So now I was the proud owner of 4000 shares of a company that was to be a speculative play. I had 50% of my portfolio money tied up in a stock that if it had a bad earnings report, I could be hit hard since the report wasn’t due to come out until after the close of the day.

The next day I watched the streamer all day long, waiting to see the action throughout the day.

At 3:50pm, ten minutes before the close of the trading day I was up $1 per share. If you do the math, I was up $4000 dollars. I had a bad feeling though and considered dumping the shares and call it a good day, but I didn’t do that.Another mistake. I didn’t listen to my gut instinct. Instead I listened to the advice of my mentor and made the decision to ride it out.

Do I really need to tell you what happened to me in the next 17 hours while I waited for the stock market to open up?

The report came out at 4:05pm and the company missed the street’s (Wall Street analysts) estimates by $0.04. Not only that, they also stated that their guidance for the next quarter was grim. I watched as the stock price dropped down to my cost basis and continued to go south from there. By the time I was able to sell out of my position, I had lost $12,000.

That was the most expensive lesson I have learned up to this day. I realized that not only did I make one mistake, I made five in in a twenty-six hour period involving the same stock. The reason that I say the “lesson I have learned” is because I’ve never made any of those mistakes again. It’s been years since that trade, but it’s the one I will always remember.

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