# How to lose €14k in one year...



## CorkGuy12 (10 Oct 2008)

Hi all,

Not posting here looking for advice, or help, but just a story that might help somebody else at some point, and I guess I'm using this as a bit of a confessional box also 

I've always been a good saver, since I was a kid. I'm in a secure job, and earn good money (53k) for my age (late 20's.)

For the past few years, I've had an interest in the stock market, but never actually did anything about it until last summer (2007). I was fed up of seeing companies that I 'fancied' going up and up, when I was predicting the same thing to myself. One company in particular went up 500%, and I 'knew' it would but did nothing about it, which was kinda infuriating really!

Anyway, I decided to pull €5000 from my savings, to play about a bit.  I was going to spend 1000 on 5 stocks, but then I changed mind, and decided to play a little more - ended up opening a spread betting account (no lectures please).  I started with €1000 in there.

Within a few weeks, I was at €1500. This was great.  I was picking good companies, and often it was real day-trading stuff - taking a profit if I made €50 etc.  So anyway, after a while I threw in the other €4000.  It went up and down for the next few months. I had a few favourites -  stocks that seem to go up 5% every 2nd day, often just timing it right made the difference.

Anyway, by the end of October 2007 I had reached €9,500.  That's a 90% return in about 3 months. Tax free.  Wow. Amazingly the last stock I sold to reach that figure was none other than Bear Stearns.  Of course that's when the Dow Jones was at 14000.

Then I got cocky. The very next day, I lost €1500, a week later €1600, day after that €900. In fact in November 2007, I saw €8000 disappear.  Impending trade closures made me transfer an additional €1000 into the account to try to keep things alive. (making €6k investment total)

Then I got stupid.  Betting on shares/indices/futures I knew nothing about.  (All my previous shares were in my own industry, so I had a real idea about the companies).  By April 2007, when I made my last trade I was down to about €200.  It's still sitting in the account.

I wasn't really upset, I had pretty much written off money I deposited originally.  It was a fantastic learning experience.  Something I'd be willing to pay for.  Was doing homework every night for an hour or two! I guess annoyed was the word, that I made some reckless decisions, and didn't cash out when I should have. Hell of a ride.

So, you'd think I'd have learned my lesson, right?  Well, no.

In June 2008, I went to a brick & mortars stock brokers, and bought €3000 worth of shares.  At the moment, they're down around 50%, but I expect them to come back in the long term.

Also in June 2008, I opened up an internet brokerage account.  Transferred in €8,000.  This was a proper trading platform - like what you see the brokers on TV use!  My account was in Euros, but wasn't too happy with the LSE and ISE stamp duty charges, so moved my account to a margin account to allow me to trade in USD.  The consequence of that was that I could now buy shares on leverage.  I had €8000, but could purchase up to about €12000 in shares  (and pay interest on the borrowings).  I had to keep a certain margin in the account naturally. This was going really well.

This was all fine up to about a week ago.  I had positions open in about 12 different companies.  Again, 'good' companies from across the world.  Some were doing really well, some not so well. I was pretty much break-even.  But this didn't have the volatility of spread betting. At least that's what I thought.

We all know what has happened in the last 2 weeks or so.  Needless to say, because I was leveraging, against a falling market, I didn't have the necessary margin in the account, a number of my positions were closed, some in profit, but some down over 60%.  Had I been keeping my eye on it, I could have transferred cash in to keep the margin, but that probably would have perpetuated my problems!

The current value of my account is around €1500, with only 3 stocks. If they were to return to what I purchased them for, I'd only get €3000.

To summarise, I've put 17k on the stock market in the last year (5+1+3+8).   All I'm left with is 1 stock at a brick and mortar broker and 3 online, all down about 50% (6k investment, currently worth €3k)

The other 11k is gone. No hope of recovery. The €3k, will likely take 5 years to recover to €6k if ever.

I'm not done with the Stock Market -  (I'm also in a investment club putting in a sensible €50 a month), and I'm going to get back in and purchase real shares with real cash maybe after Christmas.

I wasn't completely reckless -  I have around €45,000 in a savings account, topping up by €1000 a month, towards buying a house. (so the dropping prices is healing my pain somewhat!) That could have been €62k if I just left things as they were!

I don't need a 'told you so' or 'how could you be so stupid'.  I know.  Maybe my story will offer a bit of advice to some others.

Don't use spread betting.  Don't use margin accounts to purchase stock.


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## majik (10 Oct 2008)

*Re: How to loose €14k in one year...*

How the hell did you manage to save €45,000 if you're only in your late twenties and earning only €53k? 

Prey tell are you still living at home with Mammie and daddie or what? You must be single, the ladies can be a drain on the auld resources, trust me I know.

Fair dues to ya.


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## Bubbly Scot (10 Oct 2008)

*Re: How to loose €14k in one year...*

Well I admire your guts. You took a chance and invested money you could "lose", however painful it feels right now. You didn't put the house on it or anything. My other half is always predicting shares and he gets it so right but we've never taken the plunge.

Cheers for the information about spread betting etc. I'm sure the more informed of our members will have something more _academic _to input about what happened to you but I just think you gave it a shot, it didn't work out but it could have been so much worse.

Good luck in the future.


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## Bronte (10 Oct 2008)

*Re: How to loose €14k in one year...*



timod said:


> Don't use spread betting. Don't use margin accounts to purchase stock.


  Your story is very interesting, thank you for sharing it with us.  You see your last sentance - would it have been any different if you had purchased 'real' shares as you put it?  Would you be any better off in other words?


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## limerickboy1 (10 Oct 2008)

*Re: How to lose €14k in one year...*

OP - your problem with spread betting was that you opened too many posiitons with too little capital. i too use spread betting and find it much better than buying shares as i dont want to pay CGT and broker fees etc. buying shares is not any safer than spread betting, what if you "bought" bear sterns or "aig" shares , would that have protected you from the fact that they are now worthless and will never regain their value. of course not

with spread betting the most important thing is not to over bet. i always open the minimum position (25c per point) and if it goes well i can go again (based on chart analysis etc). if i am going well i dont keep on opening positions as greed will undoubtadly lead to ruin. i understand where you come from when you say its volatile . when i started some years ago i had the same experience . i was trading on hong kong shares etc and was making / losing 1000 per night even when i only had 5k in the account. i couldnt sleep properly. i didnt stop till i nearlyl lost it all.

i then left the market, read a load of books (about risk, margin, markets) etc and now i am back in and doing very well. for example at the moment i am short the euro versus japanese yen and long gold (2 euro per dollar rise /fall in gold price). very small positions and they only move about 200 per week. this i can handle no problem. this is all positions should move. i too made huge gains like you , 100%+ in a few weeks. but thats fake and just plain luck .i was buying chinese shares just cos they were going up. i knew nothing about charts, volume etc.

i guess what im saying is that managing risk is essential to mastering spread betting. if you can do that and not make emotional trades then its a great way to make tax free money and not have to rely on useless brokers and pay CGT on any good decisions you make. (CGT is crazy in my opinion)


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## foxyboxer (10 Oct 2008)

*Re: How to lose €14k in one year...*

Hi,
Thanks for sharing your experience. 
I'm 27 and I have saved 31,000 and intend to use this as investment capital.
I've been reading about shares and indices and I won't commit a single euro until I'm comfortable about what i'm doing. The psychological side of investing my own money is an area unto itself.
i'm interested in position sizing and stop loss points. 

I have read that money management is the most important thing.


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## limerickboy1 (10 Oct 2008)

*Re: How to lose €14k in one year...*

majki  - FYI . i am in my late 20's, earn 48 per year. have a long term g/f, we have a 300k house together and i also save 1k per month. im not mean in any way. i just dont throw money away. get rid of loans, never ever have interest on a credit card . turn off the lights and gas if ur not in d house . always always shop around.


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## andycole (10 Oct 2008)

*Re: How to lose €14k in one year...*

_read a load of books (about risk, margin, markets) etc_

Ref - interesting thread - quick question - can you recommend a couple of the books which got you started.


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## foxyboxer (10 Oct 2008)

*Re: How to lose €14k in one year...*

a good calculator for money management is this


for example 
if you had 10000 euro capital and wanted to risk 1% of it in a trade.
The quoted price is 12 euro per share
using the calculator you would buy 83 shares = 996 euro
The price is 12 euro per share, your stop loss would be 10% of that so you'd sell at 10.80 (83 shares * 10.80 = 896)
you have lost 100 euro or 1% of your capital.

if the price goes up then you can use a trailing stop loss of 10% of the price. you only adjust the stop loss if the price goes up, not if it goes down. this helps you lock in your profit.

for example.
bought at 12 - stop loss 10% = 10.80
price rises to 13 new stop loss of 11.70
price rises to 14 new stop loss of 12.60 (guaranteed locked in profit here)
price drops to 13.50 stop loss is still 12.60
etc


This is outlined in more detail in Van Tharps Safe strategies for financial freedom.


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## limerickboy1 (10 Oct 2008)

*Re: How to lose €14k in one year...*

books - the way of the turtles, reminisces of a stock operator, interviews with the worlds best traders


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## krissovo (10 Oct 2008)

*Re: How to lose €14k in one year...*

About 3 months ago I bought £20k of Yellgroup shares while the shares were at a all time low of 53p.  They are hovering around 90p and peaking at 96p, I am fairly sure they will be worth double that in a year but to be honest if I lost the 20k I would be screwed.  After this story I may just pull my money out and sell them.

Hmmmm


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## CorkGuy12 (13 Oct 2008)

*Re: How to loose €14k in one year...*



majik said:


> How the hell did you manage to save €45,000 if you're only in your late twenties and earning only €53k?
> 
> Prey tell are you still living at home with Mammie and daddie or what? You must be single, the ladies can be a drain on the auld resources, trust me I know.
> 
> Fair dues to ya.



Yes, and yes, lol.  But been putting that 1k a month into savings for nearly 5 years. (house deposit was the main goal) Grossing over 3k per month - 1000 into savings, 400 for rent at home, bills about 100. No borrowings.  Still leaves €1,500 for everything else.  I don't spend money on stupid things, but still have a decent life, I think anyway!



Bronte said:


> Your story is very interesting, thank you for sharing it with us.  You see your last sentance - would it have been any different if you had purchased 'real' shares as you put it?  Would you be any better off in other words?



Perhaps not now, but it time, most of my stocks would probably have recovered (some up over 20% today!). Because I was using margin to buy stock, my positions were closed, so left with no holding. 



limerickboy1 said:


> OP - your problem with spread betting was that you opened too many posiitons with too little capital.



Yes - bang on, and the same with the margin trading account. Got greedy, and didn't have the resources behind me to support that 'greed'.  As I've said, I made 90% profit on spread betting before I got greedy. Opened lots of positions, and when one or two went down, I had to close out, rather than wait for a recovery.

Thanks all for the comments.


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## Bronte (14 Oct 2008)

*Re: How to loose €14k in one year...*



timod said:


> and didn't have the resources behind me to support that 'greed'.


  Are you saying that because you didn't have any more money (resources) you would have continued putting money in if you could have?


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## lemur (14 Oct 2008)

*Re: How to lose €14k in one year...*

Guys, trading stocks or other financial entities requires skill, experience and the right tools. 

Without training & a calculated edge, you are just gambling.

If you want to learn how to trade professionally send me an email at peterbr@yahoo.com.


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## limerickboy1 (14 Oct 2008)

*Re: How to lose €14k in one year...*

lemur - you really are pushing for business


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## Marc (14 Oct 2008)

*Re: How to lose €14k in one year...*



lemur said:


> Guys, trading stocks or other financial entities requires skill, experience and the right tools.
> 
> Without training & a calculated edge, you are just gambling.
> 
> If you want to learn how to trade professionally send me an email at peterbr@yahoo.com.



I refer everyone to one of my favourite quotes:

“The idea that any single individual without extra
information or extra market power can beat the
market is extraordinarily unlikely. Yet the market
is full of people who think they can do it and full of
other people who believe them….Why do people
believe they can do the impossible? And why do
other people believe them?
Daniel H Kahnemann, 2002 Nobel Laureate in
Economics.


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## lemur (14 Oct 2008)

*Re: How to lose €14k in one year...*

LOL. You need to remember Marc for every losing trade there is a winner on the other side. You think nobody makes money trading the markets?


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## Marc (14 Oct 2008)

*Re: How to lose €14k in one year...*

No, I completely agree with you. Sometimes you will "win" sometimes you will lose.

But you are speculating - not investing. As long as you understand that and don't try to convince everyone else that it is investment.

If you try to time the market you are speculating - who wanted to buy on Friday afternoon?

If you try and trade securities - you are speculating not investing.

So, yes there is always someone out there who is above average - by definition.

Who are they? I have no idea. 
Can I reliably predict, in advance, who they are going to be for my clients.
No of course I can't.

Hence trying to beat the market is a zero sum game with costs.
Don't confuse luck with skill as the markets have a habit of handing out extremely large tuition bills.


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## lemur (14 Oct 2008)

*Re: How to lose €14k in one year...*



Marc said:


> No, I completely agree with you. Sometimes you will "win" sometimes you will lose.
> 
> But you are speculating - not investing. As long as you understand that and don't try to convince everyone else that it is investment.
> 
> ...



LOL Investing is speculation. What you are referring to as investing is probably 'longer time horizon' speculation as opposed to trading which is short term speculation. 

I trade for a living and that has nothing to do with luck. The essence of been a trader is to have an 'edge' in the market so as to remove the luck/gambling element as much as possible.

Also, I went long on Fri and had one of my best days in a while yesterday (Monday). I am happy to prove that to you if you want to call around.


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## limerickboy1 (14 Oct 2008)

*Re: How to lose €14k in one year...*

i also went long on friday and made huge profits yesterday . im sick of hearing people say that buying stocks is investing and trading is gambling. what rubbish. the whole thing is gambling. do u want ur stocks to go down if you buy them? of course not, u are gambling that they will go up


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## CorkGuy12 (15 Oct 2008)

*Re: How to loose €14k in one year...*



Bronte said:


> Are you saying that because you didn't have any more money (resources) you would have continued putting money in if you could have?



I thought about it. (not the spread betting though - was willing to loose that cash)  

Had I put in an extra say 4k into the online brokerage account, I'd have been able to maintain my positions, and they would have not been closed out.
(I put 12k on equities, with 8k in the account).  

I thought about doing it about 4 weeks ago, but didn't.  Didn't expect what happened in the markets.  (I only had 1 financial firm - AIB, that I had bought at the 'bargain!' price of €12! but everything I had fell in the order of 20% or more in a few days, having already been down) Most of my positions were closed out in a 48 hour period, and didn't have time to make the international money transfer to stop them being closed.

Had I purchased the shares using real cash (or transferred the 4k in time, so I wasn't borrowing), the positions would be still open, - I'd be down, but with the prospect of recovery in the medium/long term.


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## Bronte (15 Oct 2008)

*Re: How to loose €14k in one year...*



timod said:


> Had I purchased the shares using real cash (or transferred the 4k in time, so I wasn't borrowing), the positions would be still open, - I'd be down, but with the prospect of recovery in the medium/long term.


  Funnily enough I've often heard men say the same thing down Paddy Power but of course that was gambling and they were only chasing their losses.


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## zephyro (24 Oct 2008)

*Re: How to lose €14k in one year...*



limerickboy1 said:


> im sick of hearing people say that buying stocks is investing and trading is gambling. what rubbish. the whole thing is gambling. do u want ur stocks to go down if you buy them? of course not, u are gambling that they will go up


 
The difference is that the expected return from long-term investing in stocks is significantly positive but the expected return from short-term trading is negligibly different from zero.


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## FlyFishing (25 Oct 2008)

*Re: How to lose €14k in one year...*

I too am down in the market. I would say how much but lets just say it would buy me an S class. 

But i have not 'lost' the money as i only buy and hold. I follow what is commonly known as value investing. 

I bought all the way down to probably where it is close to the bottom. I am fortunate to be in a position where i can increase my position by  about 10K each month. (NYSE market only...no irish shares )

But i am not unduly concerned. Firstly i have researched this particular company well ( for the last year ) so i am confident in it. Secondly i receive a dividend which lessens the pain. ( only realised it now but it is about 6k a year which is the benefit of increasing my holdings ) And thirdly, I have invested in companies that i believe will do very well in the future. As buffet said, only invest in companies where you would not be concerned if the stock exchange closed down for 5 years....and i follow that rule. Follow the company, not particular the stock price.

To think about even more i am actually somewhat happy that the price fell so much. Let me explain. A year ago for 10K i could say pick up 200 shares of a particular company; this month i picked up 700 for the same price. So by following the strategy of adding each month (lowest average cost wins) i have increased my stake in the company for less money. Of course this will only work out for me if the price goes up but my time horizon is 5 years so i can be patient 

The stock market requires a strong stomach at times but if you do not require the cash, then to buy and hold ( only certain researched stocks of course ) is the only way to do it.


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## limerickboy1 (25 Oct 2008)

*Re: How to lose €14k in one year...*

zephro - The difference is that the expected return from long-term investing in stocks is significantly positive but the expected return from short-term trading is negligibly different from zero.

the actual long  term results from investing in stocks averages 7% per year, do you call that a good return. the actual return from short / medium term trading can be a big loss or huge returns. if you "invested" in 2003 and held until now you would have lost all your gains. where as if you traded all the way up and shorted on the way down you would be sitting on very big profits


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## hatfield (25 Oct 2008)

limerickboy1 said:


> i also went long on friday and made huge profits yesterday . im sick of hearing people say that buying stocks is investing and trading is gambling. what rubbish. the whole thing is gambling. do u want ur stocks to go down if you buy them? of course not, u are gambling that they will go up



I agree with this. You can correctly gamble that profits will go up but even if profits do go up the valuation the stock market puts on a stock can go down!


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## zephyro (25 Oct 2008)

*Re: How to lose €14k in one year...*



limerickboy1 said:


> the actual return from short / medium term trading can be a big loss or huge returns.



True. On average for all traders it's zero less costs, which is a lot less than 7%.



limerickboy1 said:


> where as if you traded all the way up and shorted on the way down you would be sitting on very big profits



Quite a big if there. It always looks so obvious with the benefit of hindsight. Can you tell us what's going to happen in the next five years though?


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## FlyFishing (25 Oct 2008)

*Re: How to lose €14k in one year...*

I would consider myself a seasoned investor. I for example only buy the FT and read it back to back. Even on holidays its the only thing i read. ( i read it because i enjoy it )

I tried the demo of spread betting on paddypower and lost all my funds in a short while. 

The lesson i learned from day trading was this:

You can be entirely sure of the future direction of a stock but if that stock fluncuates in the short term your margin can be called and thus you are out of game. So, you can be right but still lose out.

That is why for me, i only go Long.


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## therock (25 Oct 2008)

*Re: How to lose €14k in one year...*



lemur said:


> Guys, trading stocks or other financial entities requires skill, experience and the right tools.
> 
> Without training & a calculated edge, you are just gambling.
> 
> If you want to learn how to trade professionally send me an email at peterbr@yahoo.com.



Hi Peter, I would be interested...but do you charge for the advice?


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## limerickboy1 (26 Oct 2008)

*Re: How to lose €14k in one year...*

zephryo - no one can say whats going to happen in the next 5 yrs. i certainly cant and anyone who says they can is a liar. i use a set strategy and go long / short when my signals say so. if i get a buy signal in gold i buy it even if my gut feeling says its going to go down. you have to go with the trading signals everytime cos the market is all about human psychology and not what you "want the market to do"

flyfishing - day trading is a crazy idea. paddy power and most irish spread betting companies only offer rolling stock contracts so they are closed off each day etc. the uk ones let you trade a stock where the contract wont close for 9-12 months so there is no short term issues etc. also no one can be entirely sure of the future direction of a stock. buy when your signals say buy and go short when your strategy says so .its nothing to do with your own beliefs.


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## lemur (26 Oct 2008)

*Re: How to lose €14k in one year...*



therock said:


> Hi Peter, I would be interested...but do you charge for the advice?



Well, of course I charge - for training. Send me an email if you want details.


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## praetserge (30 Dec 2010)

limerickboy1 said:


> OP - your problem with spread betting was that you opened too many posiitons with too little capital. i too use spread betting and find it much better than buying shares as i dont want to pay CGT and broker fees etc. buying shares is not any safer than spread betting, what if you "bought" bear sterns or "aig" shares , would that have protected you from the fact that they are now worthless and will never regain their value. of course not
> 
> with spread betting the most important thing is not to over bet. i always open the minimum position (25c per point) and if it goes well i can go again (based on chart analysis etc). if i am going well i dont keep on opening positions as greed will undoubtadly lead to ruin. i understand where you come from when you say its volatile . when i started some years ago i had the same experience . i was trading on hong kong shares etc and was making / losing 1000 per night even when i only had 5k in the account. i couldnt sleep properly. i didnt stop till i nearlyl lost it all.
> 
> ...



You're absolutely right... no need to blame spread betting brokers for not managing the risk properly.
I do use spread betting myself and I find it's better than buying shares. but you have manage the risks.


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