Recently, we published the experiences of readers who had stories in the "I Struck It Rich" category. This time, we have some stories from the other side of investing, the "I Got Creamed" category. Most of us will recognize some portion of ourselves in each of these stories.

No investor wins all the time. Even a "smart" and well thought-out investment might not work out.

But often, our biggest losses contain lessons that can help us in the future. Many of the readers who submitted stories in the "I Got Creamed" category had a lesson they learned from it. Here are four of them.

No one likes to admit that they made a mistake. Particularly if it means taking a loss. Everyone prefers to close a "mistake" at break-even, so they can say, "well, at least I didn't lose money."

But, unfortunately, it doesn't always work that way. Often by the time we know we've made a mistake, the position is below water. Here is an experience shared by a reader who signed the email "Loosejewels":

A friend told me about ACTB. They sell sporting goods aimed at the X generation. They were aggressive at expansion and just had a merger with a big footwear company fall through. The stock went from nowhere to $8 based on the expectations that the merger would happen. When it didn't materialize the stock dropped to $1 and that's when I thought it was a good time to buy. With a total of $15,000 I decided to dump $10,000 into this stock . The President of the company came out later that day and declared that he could not understand why the stock price [was] going down and encouraged investors to stay the course. The stock went to $1 1/4, then started dropping steadily. At $3/4 I stayed, thinking that the merger with a financial institution would allow them to expand that much easier. The stock continued to drop to $1/2 and I stayed, out of hope. The stock dropped to about 11 cents and did a 30:1 reverse split. The President resigned, the merger with the financial institution was called off. The stock price dropped to 7 cents. The call letters changed to WSOX. The 238 shares I paid $9500.00 for was worth about $17. Not even enough to pay for the trade when I sold it. I used the loss in 1999 to counter the gains I had made in other securities. During a year when everyone made money ....I broke even. Could have been worse I suppose. Lesson I learned.......cut your losses.....hope doesn't help.

At least the lesson was learned: Hope alone doesn't help at all. You need a legitimate, tangible reason for why a stock will increase in price.

The biggest lesson of the last three years has been this: overvalued stocks can still go up!

It is a lesson that has been drilled home over and over again. It has been taught especially deeply to anyone who shorted "overvalued" stocks, simply because they felt they were overvalued.

Here is a story from one reader who learned that very lesson.

On 1/5/98, I went short 100 Yahoo at $64. On 3/25/98, I went short 100 Amazon at $85. On 4/22/98, I went short another 100 Yahoo at $120. Total, this represented a $26,800 position in a $600,000 portfolio that was long quite a few tech and Internet stocks. As YHOO and AMZN rose and split, rose and split, I kept thinking they would reverse (and pundits kept writing about how overvalued they were). At the worst point in early 99 I would have lost about $250,000 covering my 800 YHOO and 600 AMZN.

My total portfolio bottomed around $450,000, a major hit. I felt like a complete idiot. Finally started covering in late May, and managed to cover the bulk during August lows. Last bits in early Nov. Total losses $59,000 in AMZN, $87,000 in YHOO.

Learned the unlimited nature of short losses!!!! Learned about selling/covering discipline!! Did manage to sit tight through the worst and cover at nearly the best times of '99. Also made a few good trades in '99 -- often with Briefing.com help -- and ended the year at $750,000.

Shorting does take incredible discipline, and the unlimited risk is not always immediately apparent to investors. When you buy a stock, your potential loss is limited to your total purchase (see the first story, above!), but when you short a stock, your potential loss is unlimited!

The term daytrading means "today." What that implies is that you should close all positions every day, and not carry positions overnight.

But it also means you shouldn't let buy orders ride overnight, as this story shows.

On January 18, 2000, I placed an after hours GTC (good till cancelled) limit order on Island ECN to buy GALT at 30. I could not get the trade executed before close of business at 8:30 p.m. and made the drastic mistake of letting it ride overnight, intending to get back to it next morning. Much to my horror, when I logged in first thing next morning, I found myself the proud buyer of 1,000 shares at 30 --- unfortunately, the stock had gapped down to around 20 right after my order was executed, apparently after some adverse revenue-continuation comments by the Israeli company’s CEO. Lost almost $10,000 overnight due to sheer stupidity. Hope others learn from this! Good site, keep up the good work!

Of course, if the stock had gapped up 10 points, we never would have gotten this story.

Lastly, here is a lesson that many have learned, at varying degrees of "expense." Know your investments. Buying an investment without doing any research on your own is always a recipe for trouble.

Without knowing your investment premise, you are only making a judgment on the movement of the stock price, a particularly risky way to judge a stock's potential. Here's an example, from one reader.

I'm a semi-amateur investor and do most of my own research using an online broker. I also maintain a small account with one of the large Brokerage houses (mainly because my wife's best friend is a stock broker there.) In the middle of last year, I bought 500 shares of Metricom (MCOM) at $40 based on the broker's advice, and was too lazy to do any independent research.

I then blindly followed the broker's advice to sell a month later when it dropped to $29. If I had bothered to do any research at all, I would have had a clearer idea of the potential and would not have sold so quickly (and would be sitting on a 235% gain today.) Moral of the story: no matter how much of an amateur you are, you may be smarter than the 'Expert Brokers.'

Thanks to everyone who wrote in with their stories.

Robert V. Green