I have a couple of topics to touch on with this entry.
First, pay attention when trading.
Second, stop fighting what you believe to be true
This isn’t the first time I have mentioned how important it is to have your head in the game when trading. Not all trading software is dummy proof and you can make mistakes if you aren’t careful. I was a bit fatigued today and decided to make a relatively small long term investment in a stock trading around $147 per share. When trading, I get used to shares that are in a certain price range. Determining the number of shares to buy or sell for a trade is generally in the hundreds or thousands of shares. For example, a trade in MTB, GLW, or CELG would be in hudreds of shares. A trade in shares of Citi (C) or AIB would be in thousands.
It isn’t often that I am trading something that is north of $100 per share. Today was no exception. I was INVESTING! I decided to open a position in shares trading around $147. I had a trade in my head as I was making this purchase and placed my order for 250 shares rather than 25 shares. Due to my setup, I don’t get a total trading cost confirmation from my software until the trade goes off. I had intended to purchase about $3600 worth of shares only to find I made a purchase of $36,000 worth of shares. Oops! Big oops.
I was in a position that has bitten me in the past. Not one where I made a large trade by mistake, but one where I held onto something when I didn’t like the risk reward. At the point the trade went off, I felt that there was possibly another $0.50 upside in the stock for the day. I felt the downside probably carried about $2.00-3.00. That kind of risk/reward didn’t suit me and I got rid of the excess shares within about 15 minutes of my trade. Within about 2 hours, I was missing out on a gain of about $700.
The investment that I describe above was in shares of Goldman Sachs.
In earlier articles I mentioned how Goldman Sachs is at the center of it all. Well, rather than continuing to fight (on whatever ground I was fighting) I decided to pick up some Goldman shares as a long term investment. If I believe what I read, write, and discuss, Goldman will find a way to make money regardless of what the economy does or what the markets do. They are a huge part of the market. In some cases, they put themselves in the position to be the tail that wags the dog.
- Is there a bubble? Goldman will short it and cause the fall…
- Are things oversold? Goldman will buy in with great entry points helped, in part, by their own research and trading action and participate in the upside movement.
- Is oil trading on supply and demand of the oil, or of the instrument that is used to trade the oil? Doesn’t matter… Goldman will work it to their advantage.
- Compensation an issue with firms that took TARP money. Easy one. Pay it back and bring in the warrants at great prices. Ahhhh.. it is good to have friends in high places.
What will Goldman do with the riches that they will generate? Well, for one, I now hope that their shares fly high. However, I would imagine that their are some other classes of shares that participate in some rather sweet dividends. I suppose that I could look that up, but I wouldn’t be allowed in the club anyway. Goldman common is good enough for me.