Friday, December 28, 2007

Idiots Turn Trades into Investments

A while ago I took a position in some Natural Gas drillers.  Specifically Grey Wolf and Nabors.  I never really planned on owning them long term.  I just took positions because I thought I wanted a few different energy plays and so I branched out into an area I wasn't totally comfortable with (mistake #1).

I actually did OK on these at first, and saw some good gains.  As I was in this for a trade, I should have gotten out, but I didn't.  Soon after, the price of Natural gas spiked down and never recovered.  Since I didn't have a lot of money invested in either position, I didn't really worry about it.   I figured that it was OK and that it would eventually come back.  So I held.  Held like a chump.

I should have just gotten out of the position when it reversed.  I made a classic mistake that so many of us make; I let a trade become an investment.  I held on to the position WAY too long in the hopes that it would eventually come back.  Hope, it's the one case where it really isn't a very good thing to had.  I kept telling myself that energy was a great story and it would continue to be so (it is, but this wasn't the way I should have or wanted to play it).  I kept coming up with excuses to keep the stock.  But that was unnecessary.  It was a trade.  Trades don't have reasons, only investments do.

I finally got out of the positions this week.  I did it to take the capital loss and offset some capital gains I have but it should have never come to this.

1 comment:

  1. I went to Vegas recently and experienced something very similar. Kept losing to the house, but thought... maybe a couple more hands and I can at least break even. Not exactly how the cards unfolded.