My husband has been dabbling in the stock market a bit (since the end of June), mostly so that we can earn more than our paltry 1.75% interest on our savings account. He opened an account with an online discount stock broker and made some stock choices based on his own knowledge of some companies. He’s done quite well, profiting at about 16% (give or take a couple percentage points). However the companies he originally picked out are ones that will slowly simmer over the next few months and he isn’t ready to sell his shares. So he decided it would be best to expand his portfolio and begin day trading more volatile stocks. We originally only had 25% of our savings in his online stock account, that amount had to increase a little so he could begin day trading. We increased our investment amount to 40% of our savings, 60% of the money we saved is still sitting in our savings account. We felt this was still a safe amount that we could use toward trading.
Before investing in any company, he began studying various investment sites; YahooFinance, Google Finance, Fool.com looking for affordable stocks that were increasing by an outrageous amount daily. When he found a company he thought looked promising, he would compare their weekly growth, volume, and a few other variables and would make his choice and write it on a post-it note. Since our online broker takes a while to transfer funds, he wasn’t actually investing any money, just making notes at the end of one business day and checking at the start of the next business day, sort of practicing his day trading skills. After a week of green post-it notes all over his desk he realized that every company he picked gained a minimum of 34% in one day. One company he selected grew 74% in one day! Too bad he hadn’t actually invested yet.
So the day came when he had a little extra money floating around in his brokerage account. He had done his homework and picked a company he felt would profit the next morning. He placed his order with the online broker and put in a bid: if the stock hit $1.21, buy 100 shares. This was a small test to see if he could profit in real life and not just on paper. The next morning he got up at the crack of dawn (we’re on the west coast) and was so excited his stock choice had gained 34%! He placed his order to sell, and…..realized the purchase had not gone through. He quickly emailed the brokerage account and asked why his purchase order never went through. He soon realized his mistake, he had placed a market bid. The stock had closed at $1.18 and opened at $1.25. It never hit $1.21.
At least the order that never went through was a small one. While we’re waiting for our money to credit to our account, my husband is continuing to practice his stock trading skills and now knows that he either has to place his market bid slightly higher than he thinks the stock might hit, or place a limit bid. Good thing this is something he is learning, I don’t think I have the patience for all the homework!
