Virtual money of $100,000 was invested in diversified stocks during the stock trading simulation. The portfolio consisted of stocks from twelve companies all belonging to different industries. An overall profit of 0.41% was achieved in one month through the virtual simulation exercise. Stocks of all the companies are either listed on the New York Stock Exchange or the NASDAQ.
One hundred shares of General Electric Company were purchased on 4th April when the stock price was $31.69. These shares were sold on 7th April when the stock price decreased to $30.64. The stock of General Electric was sold at a loss since the stock began showing bearish trends since the date of purchase. In order to create a stop-loss and avoid excessive losses, the shares were sold at the earliest date possible. General Electric was chosen as a preferable stock for the portfolio since its stock has shown a constant rising trend since the last five years making it a desirable investment.
Twenty seven shares of Tesla Motors, Inc. were purchased on 4th April at a stock price of $249.72 and were sold at a price of $266.82 on 6th April. The stock of Tesla Motors was included in the portfolio as its stock was expected to rise steeply till April 6. Twenty two shares of Coca Cola Company were purchased on 5th April and were sold on 7th April at a profit of $0.53 per share. The company was chosen since it is one of the leading companies in the beverage industry and analysts recommended to buy the stock due to forecasted bullish trend.
One Hundred and Fifty shares of Flaherty & Crumrine Opportunity Fund were bought on 5th April for $11.62 each and were sold on 7th April at a profit of $0.15 each. This close-ended equity mutual fund was an analysts’ choice for the preferred mutual fund investment from the month of February. One thousand shares of Galmed Pharmaceuticals were also bought on 6th April for $6.29 and sold on 7th April for $6.97. Consequently, a profit of $680 was made in one day. Research suggested that the company’s stock was a safer investment than its counterparts.
Two thousand shares of Xinyuan Real Estate were also purchased at $4.89 per share on 7th April, which were later sold on 18th April for $5.30. The company’s stock was held till the 18th since research and forecasts suggested that Xin’s stock would begin declining after the 18th of April. Another investment of fifty shares was made on 7th April in the stock of Wynn Resorts. The stock was sold on 13th April at a loss of $2.83 per share. The company was chosen for the portfolio as it was a much safer investment than other companies of the same industry.
The account balance at the end of 7th April was $86,259 and the investments made till the 7th of April yielded a total loss of $13,741. The transactions did not result into huge profits in the first week of trading but resulted into a 14% loss. The stock of all the companies was sold when their share prices showed even a slight decline as risks were not taken during the investment period.
In the second week of the simulation exercise, investments were made in the stock of Legacy Reserves and Ampco Pittsburgh Corporation. One thousand shares of Legacy Reserves, an oil and natural gas acquirer and developer company were purchased on 12th of April at $3.80 per share. The shares were sold on 18th of April at a price of $3.60 which resulted into a net loss of $200. The fall in price of stock was caused due to lower cash flows generated by the company because of the decline in oil and natural gas prices. Meanwhile, seven hundred shares of Ampco Pittsburgh Corp were bought on 14th April at $18.09. These were later sold on 25th April at $18.18 thus, yielding a net profit of $63.
The account balance at the end of the second week was $74,686 which was 13% lower than the previous closing balance. The loss of $11,572 was largely caused due to the absence of stock sales in the second week except for the sale of Wynn Resorts’ stock which resulted into a net loss itself.
Two more investments were made during the third week of April. Two hundred and eighty shares of Hasbro, Inc. were bought on 18th April at a stock price of $86.77. These shares were sold on 25th April at $87.24 which resulted into a profit of $131.60. Past trends suggested that Hasbro’s stock would rise in the future and it was thus, held till the last week of April. Another investment was made in the stock of First Majestic Silver Corporation which is a silver mining company from Canada. A total of two thousand shares were bought on 19th April for $9.60 each. The investment turned into a loss of $1,280 when it was sold at $8.97 per share on 25th April. The company’s stock was included in the portfolio as it was displaying a rising trend since the past one year. The loss could have turned into a profit if the stock was held till 28th of April.
Third week’s closing account balance was $45,371. The balance was $29,316 less than the last week’s closing balance. The steep decline of 39% was the biggest loss in the entire month due to the absence of any profitable sales during this period.
A single investment was made in the last week of April. Eight Hundred shares of Tyco International were purchased on 22nd April at $39.21 per share. These shares were sold on the 25th of April at a stock price of $39.14. This investment also resulted into a loss of $56. Tyco International was a lucrative investment till the beginning of April as it showed bearish trends.
The closing balance at the end of April was $100,408 which was $55,037 higher than the last closing balance. A 121% gain was due to closing -out stocks at the end of the last week. The highest profit was gained from the investment in Xinyuan’s stock which was $820. The highest loss was made due to First Majestic Silver Corp.
The trading simulation exercise was a learning experience as a beginner in stock market trading. Several practical aspects such as buying or longing, holding, selling or shorting a stock alongwith closing-out a transaction and stop-loss were learnt through virtual trading. It also allowed me to learn that “Because stocks tend to go down faster than they tend to go up, Elder says that shorting may be best suited for short-term time frames” (Sincere). Stock trading was an interesting and intriguing experience. If one learns how to predict the stock market, it becomes easier to become a master player in trading. The biggest mistake I made in stock trading was shorting too early at even a slight indication of decline in prices. Moreover, proper research and calculations were also not done due to lack of knowledge. I would like to learn how to properly analyze a company’s financial information to gain more profits and evaluate a stock better in the future.
Works Cited
Sincere, Michael. "10 Common Trading Errors". Michaelsincere.com. N.p., 2016. Web. 10 May 2016. < http://michaelsincere.com/10-common-trading-errors/>
