10 Things I wish I knew before I started Trading
1. Paper trade successfully for a period of time (at least a few months) before diving in. Start by keeping your trades small because your focus is to get it right rather than make it big. By starting small, your stress levels are reduced and you can make better decisions. Be prepared to stop live trading for a while if your small live trades go bad and after closing your open positions, you need time to research and look through your trade diary/notes or make new notes to find out where you went wrong. The key is to observe, be patient, dedicate yourself and persevere for a period of time so no shortcuts to trading success unless you are one of the few trading geniuses out there.
2. Seed money would depend on type of trading instruments you trade, equities can be costly so your seed money has to be substantial. Depending on types of market and if daylight savings is a factor to be considered, your seed money has to be adjusted accordingly. Decide on your filters such as industries, shorting fees, average volume traded etc to build your watchlist. If news, earnings announcements etc factors as part of your filter, by all means add them in.
3. Ensure that you always have some liquidity in your account so you would not get margin call or margin call warning emails by breaking up your purchases into bite sizes and try to have a mix of both long and short positions in various markets and industries. The last thing you want is for your broker to liquidate your positions at whatever price they can execute. I prefer to use forex to cover any losses upon exiting my positions and similarly convert any forex gains back to SGD. This is to take out the element of forex swings just in case I don't make any trades in that market for a while. Alternatively you can choose to park part of your funds in various currencies and convert your gains at a later stage.
4. Scanning for suitable trades to be executed takes time if you don't use a software to do so thus focus on the watchlist that you have built and test out how much time you need to scan them and how many times you need to scan during market hours. You could scan twice or thrice during market hours and put in your trade at certain hours during market hours. Don't put in your orders too late because you may not get your trade executed in time before market closes. This becomes especially relevant when there's a price you wish to execute at instead of the current market price and the equity at stake is not a big cap thus volumes are typically lesser.
5. Paying for live prices is something you have to decide as it is a cost which would be beneficial if you do frequent trades. Do check whether your broker provides free live prices for the markets and instruments you wish to trade in. This could be a factor to consider when deciding which markets to trade in. Alternatively do search around for websites that provide delayed prices but again you have to work on your trading techniques to make that work for you. It's best to take a systematic approach to trading as orderliness ensures efficiency and effectiveness and seriously you need one less thing to spend time on.
6. Maintain discipline in exiting existing positions before taking on new positions. Don't have too many open positions because it can be a form of stress when they are all doing badly and you have no clue what to do. Resist the urge to add on to existing positions especially if they are in the red and stop loss can be a bane or a saviour depending on how you use it. Don't be greedy and do take profit instead of always holding out for higher profits because it can quickly turn into a losing trade. One way is to have 2 lots for each trade rather than 1 but this won't even matter if you maintain discipline in the first place!
7. Be prepared to embrace a whole multitude of emotions when trading. This is one of the most difficult aspects of trading to overcome and nobody will ever be able to prepare you for it. It is a journey that you must undertake alone and hopefully come out stronger and more ready to face what Mr Market has in store for you. The trading skills that you have or you think you have would be tested and you may find yourself having to change or improve your techniques so change is constant and it is difficult to remain open to changing while not constantly second guessing yourself. I call it mastery of oneself and its truly a journey of self discovery.
8. There are many types of trading strategies from day, swing, trend following, momentum etc but you have to find out what works for you and what doesn't. ACCICB and I have different approaches to trading and while we learn from each other, we have our preferences or nuances and neither of us is worst off by doing it our way. Both of us took some time to experiment and we share what we learn as we are newbies and self taught without having taken any courses. The Internet is a great resource to learn the basics and maybe the intermediate but the advanced charting techniques and skills are nowhere to be found for free anyway.
9. Think of trading as a way of gaining skills that is yours and yours alone and an excellent way of providing some form of income regardless of how the economy is doing. It is indeed difficult to master and sometimes I wonder whether it is possible for me to master. It is one of the few skills that you don't need to advertise or find a job for as the markets are always open for you to put your skills to good use. There are other skills that could be more valuable than trading and given that increasingly humans are trading against bots, you start to wonder whether we can beat them at trading or it's a lost cause. Maybe what we need to do is not to try to beat them but to be riding the wave in the same direction.
10. It is way way more stressful, difficult and tiring than you ever think but not impossible because how you trade is within your control. To be profitable consistently is what all traders seek but find it difficult to attain. It is a long, arduous journey with seemingly insurmountable difficulties and the choice remains yours whether to continue to trek forward or to turn around.
2. Seed money would depend on type of trading instruments you trade, equities can be costly so your seed money has to be substantial. Depending on types of market and if daylight savings is a factor to be considered, your seed money has to be adjusted accordingly. Decide on your filters such as industries, shorting fees, average volume traded etc to build your watchlist. If news, earnings announcements etc factors as part of your filter, by all means add them in.
3. Ensure that you always have some liquidity in your account so you would not get margin call or margin call warning emails by breaking up your purchases into bite sizes and try to have a mix of both long and short positions in various markets and industries. The last thing you want is for your broker to liquidate your positions at whatever price they can execute. I prefer to use forex to cover any losses upon exiting my positions and similarly convert any forex gains back to SGD. This is to take out the element of forex swings just in case I don't make any trades in that market for a while. Alternatively you can choose to park part of your funds in various currencies and convert your gains at a later stage.
4. Scanning for suitable trades to be executed takes time if you don't use a software to do so thus focus on the watchlist that you have built and test out how much time you need to scan them and how many times you need to scan during market hours. You could scan twice or thrice during market hours and put in your trade at certain hours during market hours. Don't put in your orders too late because you may not get your trade executed in time before market closes. This becomes especially relevant when there's a price you wish to execute at instead of the current market price and the equity at stake is not a big cap thus volumes are typically lesser.
5. Paying for live prices is something you have to decide as it is a cost which would be beneficial if you do frequent trades. Do check whether your broker provides free live prices for the markets and instruments you wish to trade in. This could be a factor to consider when deciding which markets to trade in. Alternatively do search around for websites that provide delayed prices but again you have to work on your trading techniques to make that work for you. It's best to take a systematic approach to trading as orderliness ensures efficiency and effectiveness and seriously you need one less thing to spend time on.
6. Maintain discipline in exiting existing positions before taking on new positions. Don't have too many open positions because it can be a form of stress when they are all doing badly and you have no clue what to do. Resist the urge to add on to existing positions especially if they are in the red and stop loss can be a bane or a saviour depending on how you use it. Don't be greedy and do take profit instead of always holding out for higher profits because it can quickly turn into a losing trade. One way is to have 2 lots for each trade rather than 1 but this won't even matter if you maintain discipline in the first place!
7. Be prepared to embrace a whole multitude of emotions when trading. This is one of the most difficult aspects of trading to overcome and nobody will ever be able to prepare you for it. It is a journey that you must undertake alone and hopefully come out stronger and more ready to face what Mr Market has in store for you. The trading skills that you have or you think you have would be tested and you may find yourself having to change or improve your techniques so change is constant and it is difficult to remain open to changing while not constantly second guessing yourself. I call it mastery of oneself and its truly a journey of self discovery.
8. There are many types of trading strategies from day, swing, trend following, momentum etc but you have to find out what works for you and what doesn't. ACCICB and I have different approaches to trading and while we learn from each other, we have our preferences or nuances and neither of us is worst off by doing it our way. Both of us took some time to experiment and we share what we learn as we are newbies and self taught without having taken any courses. The Internet is a great resource to learn the basics and maybe the intermediate but the advanced charting techniques and skills are nowhere to be found for free anyway.
9. Think of trading as a way of gaining skills that is yours and yours alone and an excellent way of providing some form of income regardless of how the economy is doing. It is indeed difficult to master and sometimes I wonder whether it is possible for me to master. It is one of the few skills that you don't need to advertise or find a job for as the markets are always open for you to put your skills to good use. There are other skills that could be more valuable than trading and given that increasingly humans are trading against bots, you start to wonder whether we can beat them at trading or it's a lost cause. Maybe what we need to do is not to try to beat them but to be riding the wave in the same direction.
10. It is way way more stressful, difficult and tiring than you ever think but not impossible because how you trade is within your control. To be profitable consistently is what all traders seek but find it difficult to attain. It is a long, arduous journey with seemingly insurmountable difficulties and the choice remains yours whether to continue to trek forward or to turn around.
Joyce,
ReplyDeleteSometimes the strength of "newbieness" is we don't know what cannot be done!
If we knew what we knew now, we may not have even started ;)
Learn by DOING or "crash got sound" may seem messy, unplanned, or without focus.
But that's how babies learn - repeat a process that gives us positive feedback; stop doing the same thing that gives us negative feedback.
Cry got milk.
Break thing kenna scold.
Now we know why a lot of adult Singaporeans "cry" a lot!
LOL!
Hi SMOL,
DeleteShhh...later people upset you say they "cry" a lot! You said what ACCICB said, if he knew what he knew now, he wouldn't have started trading! I agree too but it's funny how the more we learn, the more into it we are!