Story of Sphere3D or Tale of Successful Trading Mistakes

Previously I wrote about one of my biggest mistakes in trading in the post titled Story of Cobalt International Energy. To fully understand the scope of mistakes in trading I have encountered you may want to read that post. It is a story of losing money based on arrogance and believe that an amateur trader's psychology to keep going against the market. Many make mistakes in trading. However, I was luck to make them after being lucky. Story of $ANY aka Sphere 3D Inc is a story of pure luck. Some books may refer it to beginners luck.

Many beginner stock traders without proper plan, strategy, and money management end up losing is what many books keep repeating over and over. But what if you haven't read those books, what if you have no clue how market behaves. That was me when I started trading. While Sphere 3D wasn't my first trade, it definitely was the one of the most successful trades. The success cannot be attributed to any skill and knowledge, probably pure luck.

My main strategy as a new trader was to watch stocks that had bit price moves, either up or down. I was more interested in down part, because new traders usually just resort to take long positions rather than short. That is how I discovered $ANY, Sphere 3D. It showed up in a screener that it dropped in price a lot. I don't remember exactly, but it was more than 100%. After that I decided to follow how it would behave. What I noticed was the price was oscillating between $0.30 and $036. Simple logic suggested if I somehow could catch the dip and sell the high, it could be an easy %5-10 gain.

That is exactly what I did. Waited for the price to go down to 0.30 or 0.31, buy it with a limit order, and then sell when price went up 0.33 to 0.36. I was able to execute the same orders over and over for about a month or too. The same pattern kept repeating, I kept executing same trades. My confidence at its highest. I thought I figured out trading. It seemed easy.

However, I had no understanding of technical analysis, fundamental analysis, or reading charts at all. I didn't even know how to read candle sticks. While I was interested to learn, at the time they seemed irrelevant. All that mattered was the price range. It seemed it would keep repeating itself. At the same time I didn't see similar behavior on the other stocks I was watching.

$ANY - Sphere 3D, while seemed a promising tech company, it was ongoing profitable trades stocks. I was able to accumulate decent profits with zero regard or plan to what to do if things turned against me. Once again, and probably for the last time $ANY made a big move of luck. After a month or so of profitable trading, I woke up to a big move. Upwards. That day $ANY opened super high, doubled in its price. It was trading at $0.60 when market opened. I sold it right away for a big profit. While taking a profit was great, it was the end of the continuous range trade. That was the end of $ANY trades for me. Because of big price move, I didn't know what to do next. The previous range plan wouldn't apply. I ended up abandoning $ANY and over time it kept going down in price.

It was a great experience for a new trader. However, it was also a bad experience because it built false confidence. Because those trades didn't have a foundation or a plan. They were pure gambling activities and eventually lead to bigger mistakes like $CIE, which I described in the story of Cobalt International Energy.

Lessons I learned from $ANY is that there is some validity for range trades and can be a good scalping opportunities. But they must be done with proper entry and exit plans, and money management in mind. Amateur traders easily fall in trap of avoiding them and when luck presents itself false confidence clouds the long term trading judgment and may end up a short endeavor.

Trading $ANY was a great experience. However, it only built false confidence and didn't produce lasting trading skills and knowledge. Today I would be cautious about these kinds of trades. False confidence is one the worst things that can happen to a trader and lead major losses and psychological impact on a trader that is not easy to recover from. There is some logic to trading. But trading become blind gambling if the foundation is weak and based on false confidence.

Luckily for any new trader there are many resources available these days to learn from and built positive trading habits and strong foundation. I enjoy reading books by the traders who share their journey, mistakes, and successes.

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