Investing/Day Trading -Why is it bad to pick stocks off the losers of the day assuming they will rebound?
I have been casually watching stocks on Google's daily losers list, and playing with $1000 of pretend money and Excel.. and so far I am up 50% on three weeks (not counting $9/trade fees).
So -- Why doesn't this system work? Bonus points for any investing research that shows its a bad idea (tm).
Naturally there are some mega losers.. but even back when Fannie May tanked.. there would have been money to be made by buying at the crest of the loss, and selling the next day.
For example... If I had invested $1000 in Fannie May at the end of trading on September 8th
, and sold it at the end of the day on September 9th I would have netted $356 (minus trade execution fees). I caught Foundry Networks as they started to go up a second time on the 24th of October @ $10.85 and now they are at $12.39.
Naturally there are really bad examlpes of this (like the drug company Savient
, but even that might go up tomorrow! It seems like people overreact on large percentage sales.. and then it rebounds.
Am I playing with fire that will burn me? Is this how day trader junkies get hooked?