Swoons and a margin call

Today, finally, is a good day in the green, up 10% or so. In the meantime, I sold my itty-bitty positions in McDonald's and Under Armor today. I bought these stocks a few months back for my 11-year-old nephew as a way to show him how buying what you know is a good thing, and he's bullish on both, especially Under Armor. Well, UA was obviously horrible, sinking from the 61-65 levels I bought it at. The bloated P/E was a real indicator of where the Co was as a retail stock, plus the huge insider selling was blatantly arrogant. McDonald's on the other hand is a fine Co and I'll be buying that back for my nephew in the near future, long before UA. I'm not anti-UA. I just see major bloating, and the market crushed the stock.

The sales were key for me because of (I saw today) a small margin call. I could have avoided this problem if I had

a. Sold my CROX, LULU and STV (and other stocks) at or near the top
b. Avoided buying speculative stocks like LFT (an IPO)
c. Avoided buying more BIDU and AAPL on the way down

I could've waited and bought BIDU and AAPL earlier today when the market rebounded from the horrendous 5-day slide. I will stay on top of this margin call, of course. Took 20 minutes to get through to someone on the phone at E*Trade, but he said that it's possible that if my account continues to rise before Thursday's margin call deadline, they may not require me to sell any shares. "It's a mystery," Jeff said.

Hmm. Well, I sold the MCD and UA shares today, which could help if the funds settle quickly. You know, if I were a genius and sold near the top before the recent crash, I'd have an account worth about twice what it is today ... and today's session would've been a buying spree to da max. Instead, my account is just getting back to 60% of what it was at its top. Moral of the story: It's a trader's market. I am fully aware of this now. No longer in denial.

When the next dip begins, I'll sell 50 to 75% of my stuff, even AAPL. Then I won't dread looking at my account or at the market action next time. Yesterday (Monday) I didn't even look at my account. First time in a long, long time. Even today, I haven't activated my MarketTrader tool to watch trading in real time. It was good. I had no buying power anyway. But what I must always remember, however, is that I always have selling power.

I have always been faithful to the point of blind faith. Back in the day, when we were 13-year-old comic book collectors, it was me and Peter who loved to read the comics and learned to appreciate great stories. It was Jae who paid superficial attention to the content and really, really knew how to hustle other kids — especially the younger ones enamored with flashy cover art and infamous superhero names like X-Men and Frank Miller's Daredevil — to buy his comics. He was a GREAT salesman who knew what appealed to the masses. He'd have the same comics on the same table as Peter. Jae would have a higher price, but his loud, busy mouth and great salesmanship got him the big profits. He would sell sell sell and make money.

I hold and lose huge profits. The concept of selling, somewhere in my subconscious, is probably that it's a form of "giving up," which is absolutely preposterous. I'm learning to sell to avoid losses, which I did with many stocks in the past month. But the concept of selling to LOCK IN profits is still novel, and I must embrace it.

I realize that my honesty here can and probably will open me up to criticism, but I'm the first to admit that knowledge is key, and I intend to learn from my mistakes, to learn how to sell. It's psychology, not so much the mechanics — a 7% stop-loss is sensible to me. What's crucial now is to overcome the losing mindset, the denial that any stock is going lower ... and lower ... and lower. Hitting that sell button is equally as important as investing long term, if not more. I plan to do both.