I Did It Vs. It’s Not My Fault

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.

Let’s look at this bias that bit me in the wallet, and see how we can avoid it in our trading and investing today…

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