Even Pokemon can bring to ruin trader…
When I tried to find as many as possible advices of different traders I stumbled across the story of a trader. To my mind this story is the best illustration of that things or that behavior you and I shouldn’t repeat. As I have already said we MUST learn wisdom by the follies of others.
Anyway… At that time (it was 1999) he had already trade a month (his initial capital was $10000). His results were quite impressive – 75%. All deals made a profit. If there was any unprofitable position he immediately closed it. He was too lazy to wait when they would become profitable. At that moment it turned up to him that “devilish” security with ticker tape KIDE. That day it had risen till $45. At the same time it had cost a week ago only $29. From personal experience he knew that in the near future prices had to fall. That’s why he opened a short position at $46. The security was cheap. He had about $17500х2=$35000 and sold 200 stocks.
The price didn’t fall and quite the contrary rose till $50. Loss was 200х-5=-$1000. But the drop in prices was obvious. He sold in addition 200 stocks at the price of $50. In a few days the price was $63. He closed all other’s positions and sold another 200 stocks at the price of $61. He was sure that the price would begin to fall. And it really began…
Before he had glance over the news about this company and knew why the rise of stocks took place. Famous Japanese corporation had agreed with KIDE that KIDE would be a distributor of licenses of this corporation for its invention POKEMON. The trader decided that this was a new computer knickknack, very useful, but not for a long time. And the fall of prices strengthened his confidence. But he was mistaken. After short-term fall till $55 the prices whirl upward till $70 and the next day till $80. He rushed to investigate what was the POKEMON and discovered that it wasn’t a computer knickknack it was a new-coined fictitious being. He understood about what licenses were said in news. The most powerful American industry went into the action. Manufacturers began to replicate actively this creature on T-shirts, badges, caps, etc… IT WAS A CATASTROPHE!!! Next day stocks rose till $90. His account was about ONLY $1000, his broker sent him margin calls one by another. The broker demanded extra money and threatened to squeeze.
My logic told to me that this marasmus wouldn’t continue for a long time. No earnings from sell of licenses were unable to justify such rise of stocks during the month for 300%! And he had only one hope that he wouldn’t squeeze until it came to the end. To find extra money was impossible. And where were guarantees, that the market wouldn’t eat up this extra money before began to correct. Really the stock-jobbing began to fall. The prices were about $70. But the market is inertial. The new wave of price rise began. And he was squeeze at the price of $88. His account was about $3000 and the broker allegedly did him a service, because the securities rose till $95. But from this point Stocks of KIDE began to fall. And after 3 weeks the price was already $45. And after month it was $20. He was right but he lost almost all his capital… 
P.S. To restore his capital he needed 2 months, but he didn’t speculate with KIDE stocks.
To my mind this trader made several crucial mistakes:
• he hoped, but the market isn’t the place for hope;
• he was too greedy for money to stop when he had a chance not to lose.
I hope that I will never make the same mistakes!!! 