It’s Nice to Be Lucky Once in a While
It was the summer of 2005. I have been trading about 6 months with little money. I finally decided to step up and place some serious trades. I read that Baidu.com was about to come public and that everyone was claiming that it was the Chinese Google. Every news article and news report on the day before was about BIDU. I had loaded up my account a week before this and got approved on margin.
I woke up and started watching for BIDU to open. It was scheduled to open around $40-$44. About 3 hours after the opening bell BIDU opens up around $70. I automatically think that this is too expensive and think about not trading it but watch it anyways. It drops to $60 before coming back up and breaking the $70 mark. It broke $70 and I buy 75 shares. It keeps going up so I start using my margin and buying more. I end up owning 200 shares by the middle of the day. At this point the news story was on CNBC every 4 minutes with Maria and Ron (remember Ron?) shouting that it was up 300 – 400% from its IPO. After a while they put BIDU on its ticker that never leaves the screen. My cost average on the shares was around $90. I closed out the position during the day when I felt that it had reached its peak and was going to come crashing down. I closed out around $125 with a one day profit of $7000 on a $10,000 trading account. Intra-day high on BIDU on that day was $151.
In hindsight it’s pretty obvious what I did wrong. I should of never put so much money in one stock. I shouldn’t of been trading a new IPO that aggressively. And finally, I shouldn’t of been trading anything that CNBC was saying. But like I said in the title, it’s nice to be lucky once in a while.