Little did I know coming into 2010 on the back of a 10k gain in the first nine months of my trading life that the year just passed would be my Year of the Reset.
I was dealt some harsh lessons early on by the sordid and unpredictable penny stock world, learned that some stocks never come back — or if they do, they'll require endless patience as your precious capital is tied up for months, even years before you're able to get it back — and finally acquired the fortitude and emotional detachment to take losses early or, if not early enough, then before they become horrendous.
These are, of course, lessons that are as timeless as they are obvious but it seems that learning them is a rite of passage for any successful trader and having done so allowed me to carry out what I christened Operation:Salvage back in the summer — to offload the big losers that had been dragging on my portfolio for months on end by earning the money back through disciplined, successful trading and ending the year flat.
I'm pleased to say that I was pretty much successful; by capitalizing on the "Santa Claus rally", the year-end melt-up in the market, I was able to end 2010 with a small profit that just about offsets the paper losses in four loser stocks that remain in my portfolio, the sale of which would produce such meagre returns that I'm better off holding them in case of an unexpected spike that would allow me to recoup more cash or, less likely, get out close to break even.
The bulk of my success in '09 came from swing-trading biotech stocks, not to mention some serendipity — I was holding shares in HGSI when they announced the surprising success of their phase III Lupus drug trials — and though that sector was again a nice source of trading revenue in 2010, I made little headway with the run-up method, passing up some nice gains in ALXA and AVNR, and generally losing track of the FDA calendar altogether by the end.
Instead, I ramped up my day-trading activity with more and more emphasis on intraday breakouts while focusing on select swing trades in momentum stocks like HDY. That will continue to be my plan in early 2011, with a short-term goal of lightening up my swing positions very early in January because who knows when what has to be an imminent correction of at least 5% kicks in. We've had a great run since September and in December particularly so a pullback will be healthy for what many predict will be a profitable year for the markets.
