Everything I believed in and traded around has blown up in my face.  As you can see by my trading stats, I've lost more than 50% account value in the past month.

Theory #1, "This is finally the year of natural gas" Natural Gas was on a roll...with it hitting $13, nat gas stocks on a tear lead by Chesapeake...and then in month of July everyone decided Natural Gas was hopeless...it fell to $9 and the obliteration of natural gas related stocks.

Theory #2, "Value Tech Stocks" Believing in tech stocks with sound fundamentals...I invested in Seagate, Western Digital and Broadcom...all three blew up in my face with approximately 30% loppings in the stocks in one month.  

Theory #3, "US Financials will continue to struggle, Gold will do great and Financials in Europe will start suffering" What really happened?  US Financial stocks had one of their best months ever as the SEC restricted naked short selling on them and good earnings from Wells Fargo, Bank of America and a lot of hope in Wachovia.  Gold Miners had one of their worst months ever with Yamana Gold, Agnico-Eagle Mines and others all getting beaten up like a red-headed stepchild.  My biggest bearish positions HSBC put together a stunning rally climbing from 70 to 85 (near highs for the year) as many believed that HSBC will continue to remain completely unscathed from the credit crisis and housing crisis.  

Investing based on hunches is a really bad idea and investing on the wrong side of 30-40% moves in the stocks can make you go broke quickly.  How I could be so wrong, so badly is pretty creepy.  

How much longer can this market weather through insane volatility?  How much longer will this market believe that the energy crisis is over and the financials are completely out of the woods?  This schizophrenic mentality will ensure that people will have a very hard time profiting from this market.

I don't have much left, but I do hold firm in my core holdings of Chesapeake, Visa, Gold Miners ETF (all three have been crushed lately) and a few options on ag and natural gas stocks and a few near worthless options remaining in dry bulk shipping and tech.

In reality not much has changed...the economy is bad, the financial situation is still lousy and we still do consume an insane amount of energy.  But the market is pricing in a full financial recovery, an energy/commodities collapse and a split market where some sectors are rallying like crazy while others are given up for dead.

I took a shot at trying to make a nice profit and instead I got what I deserved for trying to be greedy and being in the completely wrong trade.  

Your first Bear market? Bulls lose money, bears lose money, don't get overly upset - learn from your mistakes. ( Evnts similar to yours shifted my focus from fundamentals/news to technical analysis - never looked back since)

Few suggestions, thou:

1. read      Practical Speculation

2. Stop overtrading/piling into more and more positions/corelated trades if priors don't work.

3. Try to understand that Bear Market is not driven by the voice of reason, any reason - don't look for rationale. You either quick or you broke.

You'll be fine - thou it is always pricey lesson to learn ( IF you'll learn )

DavidDT

Learn to beat yourself with a feather and not a baseball bat. Plenty of people that will point out your mistakes for you. Look at where you are getting your information from. I suggest getting new sources for information.

Financials dropped too far too fast and were do to go up. Not insanely up like they did but up. Oil and energy was overbought and due for a pull back. TECH is not a value stock the 2001-2 bear market proved that. HBC will eventually have to come out of hiding. They were the #3 sponsor of sub-prime and other exotic loans. They made a good move limiting their exposure in France and investing in ASIA. However it cannot make up for what they have done. Bulk shipping should recover first and is probably the safest of your plays, however no stocks are safe.

800 billion was given to Paulson to do with as he pleases in a rushed bill. Time to be scared very scared! http://market-ticker.denninger.net/archives/2008/07/26.html

Denninger says it best that the bond market is in trouble and someone (CHINA) threatened to pull the plug on our spending spree. Welcome your new masters round eye. They say they are doing it for the little guy, yeah right. If they allowed housing prices to crash that would help the little guy because then he would be able to afford a home. Learn to look at what is happening, the interest rates went down because people are scared and looking for a safe place for their money. That happened last Feb. 2007 to Oct. 2007. They made their money there then went to commodities. Big money is always on the move it is your job to figure where it goes next.

It takes a lot of intellectual honesty to do an exercise like this - impressive.

If these were really speculative hunches, there's no excuse; you need to have better information to trade on. If you actually did a lot of research into creating your theses, do they still hold? If so, maybe you should add to your positions. I don't really have any specifics related to your trades, as my main position is short investment grade credit default swaps, though I will say that piling on momentum positions and cutting when the losses start to hurt isn't a long-term winning strategy. Maybe you need to work on your risk management/trading discipline?

Recycle

"I don't think anyone could have predicted the series of market corrections the last two weeks in July."? You DO think so?

 OK, how about this one - OIL is done going down ( as well as NAT GAS )

So, CHK will go up as well. ( EWC, EWZ will go up, OIH/XLE to follow shortly )

 JCullen - I second you on your opinion

I moved to saving in a cash position and doing some minor ego trade gambling in the market cutting my losses at the carryover limit.  This has saved me a fortune since early 2001.  I have tested as many hypothetical trading strategies as I can think of in backtest simulations.  So far, all of my hypothetical trading strategies proved hypothetically unprofitable in backtesting.  Even the reversal of my loosing strategies backtested unprofitable due to commissions.

I moved to testing trading reactionary strategies because I could not find any correlation between balance sheet fundamentals and price action.  (I am obviously a dolt compared to Warren Buffet.)

While I have read "The Intelligent Investor", I believe risk is higher than people like to think.  On the whole I have found cash bearing interest has performed better for me than stocks or mutual funds.  I believe we must be on guard against financial ruin.  Large losses and lots of small losses all bring ruin.  If we don't know how to pick winners with proven success, ruin is right around the corner.      

Recycle, you said...

"I don't think anyone could have predicted the series of market corrections the last two weeks of July"

I did. You just have to know what to look for.

The whole trouble with strategies is that they don't work 100% of the time. It may be appropriate for one type of market at a given time, but it may not always apply. The key for me personally has been learning to use AND accept the results of stop losses. Not trying to make you feel bad, but a properly set stop loss should have saved you from those 30-40% losses or at least turned them into much lower losses.

NOBODY wins 100% of the time. If you wanted to wait it out and cost average your way back into the money over time that may be a solution if the underlying stock is a good company you believe in fundamentally. Losses happen and to be frank, quitting immediately after losses like these would waste the lessons learned from those losses.

After my first real money losses years ago, I went back to paper trading for a while to hone my skills which may be something you want to try as well. It really does come down to reading and learning as much as you can so that when you decide to make a trade you have the most tools possible in your toolbox. (i.e. your brain)

Having said that, investing is not for everyone, especially in this market. If you want something that is exactly the same every time, you may very well be better of with a savings account, but my point is don't let a few losses discourage you. You believed in it before, it's just the implementation that needs work. Get a well researched winning trade under your belt and then decide to give it up if you still want to.

Hurray for stop losses!  Every time I used one, I was glad and slept well.  When I didn't use them and needed them I lost sleep.  Nassim Taleb in the book Fooled By Randomness says that the best traders "blow up" (loose more than they ever made) when they don't have a plan for being wrong.

An even ballsier move is to reverse one's position when they are wrong, like take a short position with the trigger of the stop loss.  I think Geoger Soros does this and spouts some gobbly gook explanation calling it reflexivity.