How I lost $500 rather than profiting $2000 :(

Today was a day of learning.

First, Mike announced MTG as a prehit in his chatroom. I checked the news on it, and it looked like bad news to me. So I ignored it and decided to look at other plays.

Big mistake. Evidently the news wasn't so bad compared to what shareholders were expecting. MTG ended running from $4.50 all the way up to $7. If I had done a 1000 share buy order, I would've had around a $2000 profit.







LESSON LEARNED: Don't assume you know how people will react to news. If a prehit starts off green, and if the price action/volume says BUY, then go for it!



Instead, I decided to play QMNM this morning. It looked like it had been bottoming around 2 cents, and they had good news this morning. It was also up premarket. It opened, and was trading between 2 cents and 2.1 cents. I decided to only play it if it broke above 2.1 cents (as 2.1 cents was a significant resistance yesterday afternoon).



It jumped to 2.2 cents, and I put in a 200,000 share buy order. I got filled at 2.2 cents, which ended up being the high of the day! QMNM dropped back to 2.1 cents, then continue trading between 2 and 2.1 cents. After about almost an hour, I decided I couldn't risk it falling below 2 cents, so I got out for a $500 loss after commissions.







Good thing I got out...it could've been worse, because QMNM fell below 1.8 cents.



QMNM was a BIG mistake for me in a lot of ways. First, I was trading off the news rather than the chart. You should never trade off news! You cannot predict how people will react to news (see MTG). Charts/volume/price action should ALWAYS be the #1 driving force in a trade, and then you can use the news as a secondary source in aiding decisions.



That's not to say I was using the news and nothing else. I thought QMNM was bottoming out in its consolidation pattern and had room to do a quick jump up. I also waited for it to break a key intraday resistance level. But the fact is I was still using primarily news as my driving force to get into the trade. If I had used the chart alone, I would've never gotten into this trade. The MACD's are falling, QMNM has been unable to break out of its consolidation pattern, and the 200 day sma is decreasing. Also, QMNM has failed to have good surges in response to news lately. The fact is, QMNM is a dead play, and shouldn't even be on my watchlist (and I've taken it off my watchlist now).



Also, I shouldn't be playing market prehits for these cheapo pennies. They don't act like the $.50 - $20 stocks, and I shouldn't play them like it. They jump around too much, and it's too easy to get caught in a big loss. It's so tempting to play these, especially after my big win in UVSE.



As I mentioned in another blog, I should only be playing these small pennies if they have perfect setups. UVSE was a big winner for me because it was a perfect setup. QMNM was hardly a perfect setup. I broke one of my rules, and I paid for it...literally.



I also used up a day-trade on it. I'm out of day-trades now, although I should have one back tomorrow.



LESSON LEARNED (AGAIN): Only play small pennies if they have perfect set-ups



LESSON LEARNED: Don't play small pennies in the same way as other market prehits



LESSON LEARNED: Don't use news as your primary driving force behind getting into a trade



LESSON LEARNED: Charts/volume/price action should always be #1



I'm not happy to fall below $6000 on my account, but at least I'm still up for the month.

GUTTER ACCOUNT STATS:

Beginning of month: $4856.64
Yesterday: $6026.67
Today: $5526.63

Today's loss: -$500.04, or -8.3%
Gain since beginning of month: $669.99, or 13.8%

Positions traded for a loss: QMNM (-$500)