Lessons I’ve learned on December 16th 2014 – Trade #13

Here are some of the lessons that I’ve learned today as the day went by; still a couple of hours to go, but I don’t see any good plays.

First of all, focus on your picks and cancel the noise, really… Following a quick alert on the chat, I shorted $GTATQ; I ended up losing $69.1. In retrospect, the price did drop about $0.06 from where I short-sold it and I could have made about $200 if I had stayed in the position 2h longer. Coulda, Shoulda, Woulda, Didn’t.

Now the important lesson for me to keep from this loss is in regards of how OTC stocks are traded and how dependent traders are on the whims of market makers.

Here’s what happened: I shorted $GTATQ, order that got filled almost immediately. As I saw signs of reversal on the price movement I wanted to exit about 3 minutes later, so I sent a buy to cover market order. 2 more minutes passed, and still not a fill. After cancelling and recreating the order a couple of times, I finally managed to get a market fill after around 25 minutes…

Why did this happen? Well, it seems market orders are not filled as quickly, leaving the trader hanging for a while before it gets executed. After talking to more experienced traders about this issue, it was pointed out that I shouldn’t make MKT orders on OTC stocks and they should always be limit type orders, as they add fluidity to the market; had I done that I would probably have been able to cut my losses at $16. More importantly an order should never take 20 min to execute if you do things right.

In conclusion: OTC stocks ALWAYS LMT orders, never MKT orders.

So this is a good lesson to remember for the next time.

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