My Experiment is Over!

For a while, I was experimenting with a stock trading technique.

The Idea

I picked a stock based upon its Beta value, which indicates the volatility of the stock price. The higher the Beta value, the more the stock price fluctuates.

I tried this, because I tried to extend my test with the Slow Stochastic technical indicator, telling me when to buy and sell. The more volatile the stock price, I figured that it would provide me with more opportunities to buy and sell--and MAKE A PROFIT.

Note: The Slow Stochastic indicates when a stock is theoretically overbought (time to sell) or oversold (time to buy).


The Company/Stock

I tried this with Biopack Environmental (BPAC.OB), a company that makes biodegradable packaging for food items. For example, some vegetables come with this packaging now. I didn't think this would explode, but the price seemed to be volatile enough that I might be able to take advantage and profit, if this technique worked.

I found a few flaws with my "thinking."

• You cannot set buy or sell by setting a value limit with OTC stocks. You can only buy and sell what the market allows, which means that you have to watch this closely. You cannot just put this on "autopilot."
• When the company is small enough, the financial information for a small company is not as visible as it is for larger companies.
• Generally, people buy plastic by weight volume. Most food packaging is extremely light, meaning there is not a lot of room for sales revenue, much less profit from that revenue.
• I don't know very much about food packaging or shipping. I strayed from my Rule #1: Only invest in things that you know.
• Not many people follow stocks on the OTC. So if the few the follow it only know bad news about your stock's company, there isn't a great chance for a rebound.
  

So what was the result?

Bought: $0.29/share
Sold: $0.13/share (about 55% LOSS)

The Play-by-Play

Initially, I wanted to sell at $0.26/share, but the indicator told me to hold onto it.

The indicator later told me to sell at $0.21/share, but I decided that I lost plenty and didn't have very much else to lose with this stock.

Today, I read a financial report from them indicating that they don't see themselves having enough cash to continue operating, unless they get more investment capital.

Finally, I sold this.

In fact, the Bid Price (the selling price) was listed at $0.11/share. I tried to sell it a little higher at $0.14/share, and it was not accepted. Then I tried to sell this at $0.13/share, and that got accepted. So as bad as this was, it could have been worse.

Luckily, I did not put very much money into this at all, which is why I was willing to take chances that I would not usually take, but hopefully, I learned some lessons.

I'll let you know what my next test will be. Hopefully, if I don't get it right, I will make NEW mistakes.