Some trades really stick in your memory.
Maybe it was one where you won big – or lost big – but something about it just stood out from the rest.
I had a trade like that back in 2001. It was a breakeven trade, so I made no money. And yet, it’s etched in my memory.
The market bubble of 2000 had popped, and traders were largely following the big week-to-week swings in volatility.
While 2001 would prove to be another down year where the markets lost 15%, there were two rallies of over 20% during the year – a fact that highlights how big the swings were.
On this day, I had traveled to Chicago and was trading in my friend Brad’s day-trading in a suburb on the edge of the city.
CNBC was blaring on the TVs hanging in the corners.
It was a big up day in the markets during the counter-trend rally that lasted from mid-September until the end of the December.
During that tumultuous time, our strategy was to “test the waters” early in the trading day in several different fast-moving sectors. When a trade in one of the sectors started to work, we’d pile into other similar stocks.
Today, semiconductor stocks were moving.
Oddly enough, I was trading a stock that is making headline news this week.
Broadcom Ltd. (Nasdaq: AVGO) is making the largest tech takeover bid in history.
Back in 2001, before all of the mergers and acquisitions over the last 16 years, the stock traded under the symbol BRCM.
I had a good profit in BRCM, who was a fabless chip company – Meaning they designed and sold semiconductors, but contracted the fabrication to another company. I checked my sheets for a similar stock and found PMC Sierra (trading under the symbol PMCS at the time) – another fabless chip company that traded very similarly to BRCM.
I bought a bunch of PMCS stock and waited for the profits to roll in.
But the stock stayed flat.
I watched as BRCM and almost all of the other chip stocks soared.
But PMCS laid there like a rock.
Every time it would move up a penny or two, a large seller would jump in and keep the price flat.
I was livid. I had done everything right.
I had found the big move of the morning and was making good money in BRCM. But I should have been making really big money with two horses in the race.
Except that PMCS wouldn’t go up.
I cashed out of the PMCS for literally no money.
If I had bought practically any other chip stock, as my “pile on” company, I would have been in the “deep cabbage” or a big money day.
As it was, I had a good day that could have been great.
I had missed a big profit opportunity because of a bias that we all suffer from in many walks of life – but especially in the markets.
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