Another Trader Account Blow Up Lesson ($108k)

It’s been a while since the last big pump and dump KBIO and now we have yet another one, MGT Capital Investments. With every pump and dump there seems to always be some account blow ups to follow, margin calls and gofundme accounts created. For those traders who have been lucky enough to be in this game for a long period of time know better than to bet the house on these high flying stocks. Do we trade them? Sure. Do we buy large positions and double or triple down when the sky is falling? Most times no if we can help it. Why risk an entire years work in one trade? Surely everyone knows to protect their profit’s and assess risk appropriately right?

Nick who goes by (NoEmotionTrader) on apparently didn’t follow the rules.

Stock Twits NoEmotionTrader Screenshot Stock Twits NoEmotionTrader Screenshot Post

Feel free to read more on his page. But the story speaks for itself. Apparently averaging down numerous times ended up with 65k shares at an average price of 4.88. As you can see on the chart below on 5/18/16 the epic run up came to an end, the stock crashed after breaking 4.80 and didn’t stop till it hit 2.65. An 80% drop in 25 minutes. I’m guessing that is where Nick’s broker closed his position as it was dropping causing a loss of 108k. Since then the stock still hasn’t recovered and is currently trading in the middle 2’s.

Screenshot of MGT Chart from Etrade

I’m sure there are plenty more horror stories out there but most of the time people don’t share those. This is a lesson for all of us to learn and I appreciate Nick sharing it with the world as painful as it may be. I wouldn’t wish it on anybody.

Blog Post: Risk Management in 5 Easy Steps

I traded the stock that same day but only 1k shares with a tight stop loss. I ended up losing about $150. I knew I was playing with fire and a big drop could come at any time, even if I got caught up in that big drop I would of only loss 1-2k at the worse case scenario. That’s why I only traded 1k shares. And it was still heart pounding, which meant I shouldn’t have been in it to begin with. I can’t imagine what it was like with 65k shares!




One Response

  1. Rich4life June 1, 2016