 Photo: Dollars and Sense
Trading can be described as the younger cousin of investing. Both trading and investing are vastly different ways of making money from the financial market. |
Part 1: Stock Trading - Collin Seow
Source: Collin Seow
Collin Seow is the founder of Collinseow.com / TradersGPS. He is a qualified Chartered Portfolio Manager (CPM) holding a Certified Financial Technician (CFTe) qualification, and is a member of MENSA Singapore.
A charismatic trainer, his courses equip people with trading and investment strategies that help them navigate the complex financial markets.
Q: How long have you been trading stocks for? What does your trading strategies focus on?
CS: I have been trading stocks for more than 21 years but to be honest, for the first few years, it was more like buying and “hoping” for the best.
My strategy has definitely evolved over the years. In the initial years, it was a discovery process. I was mainly using fundamental analysis to identify and buy stocks that I thought had dropped below their true value. The next stage of my learning journey was to trade short term using technical analysis (TA) and finally developing a rule-based trading system (algo) based on TA to buy and sell. The time frame that I hold stocks can range from weeks to months.
Q: What are some common mistakes that you typically see new traders making ?
CS: 2 mistakes most new traders make.
1. No confidence in their strategy
Losses are part and parcel of trading. However losses are also what shake people’s confidence in their strategies. This is the main reason why new traders constantly jump from one strategy to another. Each time they meet a few losses on a strategy, they will switch to another. To become a profitable trader, we must become masters of our strategy, psychology and risk. To become masters, we need to put in the time and effort, to gain the experience and knowledge in our strategy.
2. Not paying attention to money management
Money management is very important in trading. A lot of new traders focus on making money but not on losing money properly. This one simple step of learning how to manage your losses can turn you from a losing trader into a breakeven, or even slightly profitable trader.
Q: What are the areas of focus that new traders should pay attention to instead?
CS: Instead of focusing solely on making money, traders should focus on the process and routine, and then refine their strategy along the way according to their personality. I find that processes help us do our work better.
Q: What are some myths that people typically hold when it comes to stock trading?
CS: “Trading is easy to learn.”
New traders are often lured by the success stories they hear in the marketplace – of course for every success story, there are dozens of heartbreak stories they do not hear. They also tend to underestimate the difficulty of trading because it looks deceptively easy. Sit at a desk, watch the screens, click a few buttons and their bank account is topped up with more money. Some traders think they can be profitable by just from watching a few videos online or reading some books. Trading is a psychological endeavor. You can save a lot of time, and money, by getting a good mentor and having a good trading system.
Q: Aside from having the right skills and strategies, how important is the attitude for the success of a trader?
CS: Most people are not disciplined and cannot, or do not, put in the time and effort required to trade well. They need to have a system that is back-tested to be profitable and robust. Keeping records is extremely important because if you cannot measure your past performances, you cannot improve. You need to create a feedback loop to receive feedback from your trading.
In one of my courses, The Systematic Trader Course (SMT), we share this acronym to help you remember: ETET. You should always know your Entry price, Target price, Exit price (stoploss) and Time frame. These are some of the information that should be recorded for feedback and future learning in your trading plan.
Q: What are some attitudes that you have which you think have allowed you to become successful in what you do?
CS: Being introspective and retrospective. I know myself well enough to know what will work for me and what will not. Also learning more about the current state of my trading, through the feedback loop, and constantly making necessary adjustments?
Part 2: Forex Trading - Rayner Teo
Source: Rayner Teo
Rayner Teo is an independent trader, ex-prop trader, and founder of TradingwithRayner.
He is the most followed trader in Singapore, voted Top 5 most helpful traders on Twitter, with more than 23,000 traders reading his blog every month.
Q: How long have you been trading Forex for? What does your trading strategies focus on?
RT: I’ve been trading Forex over the last 8 years.
I adopt a Trend Following approach. This means I buy when the market is trending higher, and sell when the market is trending lower. I exit my trades if it goes against me and I ride the trend if it moves in my favour.
Q: What are some common mistakes that you typically see new traders making?
A common mistake many traders make is to look for a “holy grail”. Well, it doesn’t exist. If you ask me, the closest thing to the Holy Grail is having a loss of not more than 1% of your capital on each trade, so you can live to fight another day.
Another common mistake is hopping from one trading strategy to the next after a few losing trades. This “cycle” keeps you in an endless race to find a perfect system, which as mentioned earlier, doesn’t exist. Instead new traders should find an approach that suits their personality and their goals.
Q: What are the areas of focus that they should pay attention to instead?
RT: Traders should pay more attention to having a detailed trading plan. It should set some parameters for your trades such as what type of market conditions you should trade in, how to enter your trades, how to exit your trades and how to manage your trades. And if things don’t work out, you can look back at your plan, learn from it and find ways to improve it.
Also, you want to focus on risk management. Without it, even the best trading strategy will not save you from blowing up your trading account.
Q: Aside from having the right skills and strategies, how important is the attitude/mentality for the success of a trader?
RT: Discipline and attitude is everything.
Q: What are some attitudes they need to have?
RT: You have to accept that you may be wrong more often than you are right and still make money. Always stay hungry and keep learning about yourself and the markets. Have the grit to keep pushing forward even when times are tough.
Q: What are some attitudes that they are better off not having?
RT: “The know it all” attitude, refusing to acknowledge and learn from your mistakes, and being too attached to an individual trade outcome.
Q: What are some attitudes that you have which you think have allowed you to become successful in what you do?
RT: Perseverance and the ability to reflect and improve.
Part 3: Options Trading - Alex Yeo
Source: Alex Yeo
Alex Yeo is a self-directed trader and the co-founder of BigFatPurse, a leading financial education & technology company in Singapore.
He trades futures options primarily and holds a Certified Financial Technician (CFTe) designation, accredited by the International Federation of Technical Analysts (IFTA).
Q: How long have you been trading Options for? What does your trading strategy focuses on?
AY: I started trading options 3 years ago.
I sell options primarily and collect premiums. I focus on selling futures options.
It’s very similar to how insurance companies sell you policies and collect premiums from you. If nothing happens to you, the insurance company just keeps the premium.
As an option seller, I pick a price level that I think the market wouldn’t reach, sell an option contract at that price level and collect a premium. In other words, buyers pay me when they buy the option contracts.
There are several reasons why people buy options – higher leverage, hedging their positions. When they want to buy, someone has to sell it to them. I am the one selling and I get paid for underwriting the risk.
Q: What are some common mistakes that you typically see new traders making?
AY: One thing I observed is that new traders tend to think that if they worked more on their trading psychology, they will be profitable.
While psychology is important, before they focus their attention on it, they should make sure that their strategy has an edge in the first place. If your strategy doesn’t have an edge, no matter how much you work on your trading psychology, you would never be profitable.
Q: What are the areas of focus that they should pay attention to instead?
AY: They should find and develop their edge in the market. They need to have an in-depth understanding of how prices move, utilize 2nd level thinking, back-test or forward-test their strategies.
Q: What are some myths that people typically hold when it comes to options trading?
AY: They think that trading is easy and that they can make money with just a little bit of effort. All you have to do is to recognize some chart & candlestick patterns and easy money is up for grabs.
If it is so easy, everybody would be making a killing in the financial markets, and nobody would need to work anymore.
Another one of the myths is thinking you can trade for a living with a $1000 account. Because assuming you need $3000 a month to survive, you are looking at a return of 300% each month consistently. It’s only a matter of time before you lose that account.
Q: Aside from having the right skills and strategies, how important is the attitude/mentality for the success of a trader?
AY: Extremely important. If you look at successful traders, they all possess certain character traits and attitudes.
Q: What are some attitudes they need to have?
AY: Discipline and perseverance
Q: What are some attitudes that they are better off not having?
AY: Ego. Traders can be egoistic. They always think they are right.
Q: What are some attitudes that you have which you think have allowed you to become successful in what you do?
AY: Although it sounds clichéd, perseverance plays a huge part. There is a learning curve and it may take a few years before traders can see any success.
| ♦ What We Can Learn From Their Insights |
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When we see the responses from the three traders, we observe some undeniable similarities among their answers even though they trade very different financial instruments. |
This article is republished with permission from Dollars and Sense.
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