Virtual Stock Trading Summary
As an introduction, I think trading is a very risky manner of investing money and earning from it. But of course, with high risk comes high opportunity. And this is why engaging in this kind of business should require high knowledge and calculated moves and strategy involved. Prior to this course activity, I have a slight of interest in how to earn money through trading the stock market. I considered the entire course as a way of testing the water to see a mypotential future in this market.
According to my trading history, I have made around 40 pairs of buys and sells. Around 43 companies were included in my portfolio. There were various reasons behind the selection of a particular stock. These include going with the trend in the market according to investors’ hype, news breakout, demand on the product depending on the occasion or season, personal inclination towards a product, etc.
First on the list, companies like 1-800-Flowers.Com Inc (FLWS) and Hershey Co (HSY) were bought around the Valentine’s week considering that these products are in demand during such season. Expectedly, my portfolio gained on these products once they were sold after the rally.
Some companies were purchased not mainly because of the product that they release for consumption but also on what’s happening inside the management. On late February, shares of McDonald’s Corporation were bought after it was announced in the news that a change in management was brewing. This was considered as a potential opportunity for positive changes to occur within the company which has been subjected to several issues in the previous months in terms of their services and problems within. From the buy low situation, I have profited from this particular transaction. Another example, Lowe’s Companies (LOW) reported on late February that their 4th quarter earnings from last year were better than expected. This was considered good news which triggered the buying.
Certain purchases can also be triggered because of occurring or looming success (or failures) of other companies. As a good example, I bought ARM Holdings plc (ADR) (ARMH), InvenSense Inc (INVN), and Synaptics, Incorporated (SYNA). These companies are known suppliers of Samsung phones. With the release of Samsung S6, it was an opportunity sought and so some stocks were bought. After the release recently, profits were also made from these companies. Another was Mylan Inc (MYL) which was on the news lately because of its mega-deal offer to rival Perrigo for a buyout. This news increases confidence on the company’s capability.
For many cases during this evaluation, some stocks were bought because of the popularity of their products and services, i.e. the brand that they represent that makes investors treat them with high regards. For example, the stock of Apple Inc. (AAPL) which I bought at a high volume. Other stocks which I classified of good brand are Starbucks Corporation (SBUX) and Netflix, Inc. (NFLX).
Also, some trades were made because of its potential in the long run. Most of these are not well-known in the market but was perceived to perform good in the future like developing technologies, energy sources and distributors, etc. Examples of these areIkanos Communications, Inc. (IKAN), StealthGas Inc. (GASS), and Petroleo Br Sp ADR (PBR).
The trading experience was interesting because it was a constant learning process with an immersion into varying emotions and psychological activities. For a lot of times, it was frustrating when losing and then joyful when winning. It was least expected that trading would be more of an emotional or psychological challenge rather than the mathematics and science behind it. Going with how the market goes can be very stressful and this is based on the idea that if trading with virtual money was already that hard, the stress could magnify if real personal assets are already involved.
Trading: Luck or science?
Based solely on this activity, I can say that the initial requirement to be a good trader is to know how the stock market works and how one earns from trading in it. After all, one cannot execute a trade without having a slight idea about it. But when it comes to the long term of it, one has to have a lot of discipline and be emotionally ready for what it could bring. This discipline includes not opening or closing trades out of emotion and following the plan of when to take profit or stop losses. Luck still comes into play because one could not always predict what could happen next. “Good luck” is always good, but should “bad luck” comes, a good trader should always have a room for it, i.e. he or she should properly manage that risks the come along with every transaction. Overall, discipline outweighs knowledge when trading. This discipline controls the risks (or bad luck) that comes.
Conclusion and Recommendation
If I’m to re-do the entire process, I would have been more patient with a lot of trades that I closed because many of those trades turned out to be winners after some time. In the same way, I could have allowed earning shares to grow for more rather than closing them prematurely. This is why I have learned that before opening a particular trade, certain take-profit and stop-loss values should have been considered. And these plans should be strictly followed regardless of the euphoria or pain that follows once the trade becomes active.