A series of video tutorials to help you get started! (In collaboration with TradeHero & SGX)

The Top Hedge Funds of 2016 Share Their Best Bets for This Year (With New Charts & Examples)

Bloomberg recently did a good cover on what hedge fund managers are looking out for in 2017. The general consensus is clear; the market is uncertain, and world events are causing markets to react in unexpected ways.

“You’re going to have to take way more risk today in order to try to make outsize gains versus a year ago,” -Hanif Mamdani, PH&N Absolute Return Fund

I found the article to be pretty insightful, with a handful of key take-aways. To make it easier for my readers, I’ve broken up the article into easy-to-digest sections, and added some charts and examples to make it clearer. Here we go:

1. Distressed Energy Companies

Hedge funds specializing in purchasing companies that are on the verge of collapse, actually profited from the rise in oil prices last year. Companies that were in the red started to turn profitable, and after purchasing companies at ultra-cheap prices, these assets were starting to bring in significant capital gains for hedge funds. Even though oil has risen significantly, hedge fund managers still see the potential for more gains.

It’s interesting to look at the related ETFs for oil and gas companies. I’ve pulled out 2 charts of U.S Oil & Gas company ETFs (XES and IEO). The gains over the year are impressive.

The charts above summarize the oil and gas sector for the year of 2016.

On the technical side, the Oil & Gas sector is still on an uptrend. It is prudent to remain bullish when the market is still trending up. It’s interesting that XES has broken out of a wedge, and looks to be gathering bullish momentum.

In the longer term, oil & gas companies seem to be picking up momentum.

 


A few weeks ago, I was invited to give a talk at the Singapore Stock Exchange (SGX) on the Offshore & Marine sector, and Keppel Corp was one of our top picks. 

2. “Global Macro Deceleration”

Some hedge fund managers are positioning themselves for the worst. For example, a border tax in the U.S could “cause a global depression and a major equity market decline,” says Carlson Capital’s Black Diamond Thematic Fund. They’re waiting for commodities to “correct meaningfully” (meaning a decline in commodity prices), and looking to scoop up good stocks at the bottom of the market decline.

Traditionally, sector rotation strategists have sworn by investing in stocks like semiconductors, industrials and miners during full-blown bear markets. These stocks are famous for having high volatility and are not for the faint-hearted. A famous example, Caterpillar Inc, is shown below:


Heavy industrials like Caterpillar Inc tend to move cyclically with the economy. Notice the 6 big swing it has had since 2012!

3. Long High-Yield Corporate Bonds Amidst Rising Interest Rates

Some hedge funds are betting on higher-yield corporate bonds rising during this period. High-yield bonds typically have both a short maturity and high coupon rate. With interest rates expected to rise in the coming decade, bond prices are likely to fall and bond holders will actually be worse off (Economics 101!). However, with the shorter maturity, higher-yield corporate bonds become more attractive as they are less exposed to the beating by rising interest rates. Bearing in mind these ideas, it is understandable why these have been attractive to institutional investors in the past year.


I’ve inserted a little-known ETF, “HYG”, a high-yield corporate bond ETF that tracks the prices of high-yield corporate bonds. You can see that the bear trend sharply reversed at the turn of 2016 and has been rising steadily since. The uptrend is still in force, and some hedge fund managers are looking to speculate on a variety of interest-rate products.

What They’re Saying:

In summary, what we notice to be the consensus about the market in 2017 is this:

  • Heightened interest rate, inflation rate, and economic volatility
  • Renewed interest in unconventional investment strategies

That being said, it’s important to keep yourself updated and continually learning about financial markets. In such a unique market climate, it would serve you well to continue reading up and knowing what market participants are paying attention to.

Want to Learn How to Tackle the Markets?

Join us for a 3-hour intensive “Trading Foundation Workshop” where you will learn all the necessary skills, and witness firsthand live trading, where many of our new attendees managed to make some profits from their very first trade! 😀

Register now: http://synapsetrading.com/trading-foundation-workshop/

 

Research Sources:

bloomberg.com/news/articles/2017-02-28/the-top-hedge-funds-of-2016-share-their-best-bets-for-this-year

Why Goldman Sachs Thinks a Stock Market Crash Might Be Coming Soon

Source: CNBC

“Financial market reconciliation lies ahead…”We are approaching the point of maximum optimism and the S&P 500 will give back recent gains…” – Mr. David Kostin, Goldman’s chief U.S. Equity Strategist

While the S&P 500 continues to break new highs, prominent economics and C-level staff in multinational banks are coming out to say it’s time it has to stop.

 

U.S Equities are at Extreme Highs

As the old adage goes, “what comes up, must come down”. However, this adage has a valid explanation in the world of stock trading. Prices that go up must come down eventually because at some point there will not be any more buyers in the market, buyers would look to take profits and sell, new sellers would short the market.

 

Markets move in swings; they often don’t go straight up.

As you can see above, classical technical analysis theory teaches that every uptrend swing must be accompanied with a correction downwards. Even though the price can go in one direction for “far too long”, there will always be a correction.

Riding the bull market ?

A post shared by Spencer Li ?? Synapse Trading (@iamrecneps) on

 

A Correction is Due, BUT…

Before I go on, let me state 2 very basic facts about market euphoria:

Fact 1: Euphoria in the Market Happens Often

In the forex markets, this happens very often. In fact, these are known as gentle trending markets and the easiest way to trade these markets is to buy, add on at every opportunity, and watch your profits grow.

If you zoom in to the 5-minute charts, 1-hour charts, or move to different financial products like Forex, Commodities or Bonds, you would notice that market euphoria is quite a frequent occurrence.

Euphoria in that sense, can happen in both directions, as seen in the diagram below (Hourly chart for EURUSD)

Euphoria can happen in both directions, and for very long. In this case,
there were many opportunities to short, and the trend lasted far longer than one would expect.

Here is another recent example of riding trends:

Trends can last far longer than one expects. That’s why it’s important to know this fact:

Fact 2: Markets Don’t Reverse Immediately!

It’s easy to jump on the hype when almost every news outlet is talking about it. But the truth is this; what’s important is on the chart. Price already gives you the decision-making tools you need!

Even though Goldman Sachs says that a correction is due, that does not mean you immediately go ahead and go all-in to short the market. Even if you are fully convinced that the market is going to crash, it is best to wait for actual price confirmation before taking any action.

Daily chart of the S&P 500, with a small pre-emptive short position which I have initiated.

In trading, it’s all about probabilities. The above technical levels show how far the market might go, but what actually happens will depend on price action. And since the reward to risk is pretty decent based on this price channel, I am winning to take a small short position, and add on more later if it goes in my favour. This will ensure that I have a decent profit from shorting near the top when the market does crash. Till then, fingers crossed!

Here’s some food for thought before we conclude this article:

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” -Sir John Templeton

Cheers and have a great week ahead! 😀

P.S. For those who want to start learning about how to make money from the financial markets, don’t miss our last 2 workshops for this quarter at the special price of $25.
Check workshop availability: http://wp.me/P1riws-6gw

Research Sources:

cnbc.com/2017/02/21/goldman-sachs-market-investors-have-a-letdown-coming.html
thefelderreport.com/2016/05/23/this-might-be-the-most-extreme-stock-market-euphoria-we-have-ever-seen/

The 10 Financial Milestones that Every Millennial Needs to Aim For

Many people want to attain financial freedom, but most have little to no idea what it takes to get there. In today’s post, I will be sharing the 10 key financial milestones that every Millenial should be looking forward to, and it be a good chance for you to see how many you have achieved!

First things first…

Before one goes marching along the road of financial success, he has to get his house in order. Put it another way, he has to have a clean, honest audit of the current state of his financial health.

Also, the road to financial freedom is marked by progress. Overtime, as the person attains more and more milestones, he gets closer to his goal.

Some of these milestones are very critical; they can cause you to lose wealth in the future if they are not dealt with right now. Amassing wealth is great, but another key activity is preservation of wealth, which we are going to discuss in detail.

Here are 10 things that financial milestones that are often missed out in most people’s financial planning:

#1 HAVE A CLEAN CREDIT HISTORY

Paying personal bills on time is a great chore for many. However, the financially-free person has to attain mastery of this.

It’s quite simple really; don’t buy what is beyond you now. I’ve heard of startup founders who slept in basements to save on rent, bunking in with 4 other like-minded nerds who didn’t mind the initial shame for the future glory.

For many of us, truth be told, we are financially far-more secure. Even if we have debts, most middle-class families are able to get by and secure some savings each month.

Easier said than done; don’t spend what you don’t have.

Of course, business loans do not count, because they are much larger than personal loans.

Have you done a thorough audit of your personal debts? Getting a good credit rating is one big green tick on your financial health. Pay all your bills on time, avoid penalty fees, fines, and you can get a higher credit score on the CCRIS.

#2 LEARN THE SKILL OF BUDGETING

Before wealth is massed, one must learn how to manage small amounts of money. If he can be entrusted with little, he will be entrusted with much.

Budgeting is a simple skill, but truth be told, people don’t keep to their budgets. They adjust their budgets like their exercise schedule, their weight-loss plan, their study plan, and whatnot.

Budgeting without keeping to the budget makes budgeting useless.

The ability to keep to your budget is part of the skill of budgeting. No point having a great budgeting plan, but no resolve to get down to it. And you only have yourself to blame is you are unable to abide by your budget.

Parents have to instruct their children in this regard. If budgeting is taught to people when they are young, the attitude remains, and even when the amount of money gets bigger, the discipline keeps the person financially healthy over the long-run.

#3 BE A PROFESSIONAL TIME-INVESTOR

WRONG question to ask: “I have $10,000. What should I invest in?”

Anyone who asks this question is out of his mind. It’s not what you invest in; the correct question to ask should be “What skills should I acquire to become a proficient investor?”

Time is all you need to acquire skills. Many people complain about the lack of solid financially education in schools, but they remain at the complain stage. Being a professional investor of money requires you to first be a professional investor of your own time.

If you spend most of your time watching YouTube, great. If it makes you happy, great. But if that’s not what you want, do something about it.

Even after trading for many years, I make it a point to read good books, and stimulate my thoughts. They can be self-help books, trading-related books, or even fiction. You’ll be surprised how much you can learn from good, beefy fiction books!

#4 BE FINANCIALLY-INDEPENDENT

If you are still living off your parents, it’s ok. It’s nothing to be ashamed of, for all of us start that way. But you have to have a plan to get financially independent, where your livelihood is no longer dependent on who gives you money.

Many young people are truthfully still holding on to the security that their parents will save them if they mess up. That can be true, and no parent would want their child to suffer financial catastrophes. However, we all need to come to a place where we take responsibility for our finances, and keep track of where we are.

#5 ADEQUATE INSURANCE COVERAGE

As a responsible adult, your job is to not just protect yourself financially, but also the lives of those you love. You cannot compromise on insurance, because your life does not revolve around you alone.

Having a solid financial backing when something tragic happens will show your financial responsibility. It demonstrates that you have a clear plan for emergencies and know how to respond.

Investment-linked policies, in my opinion, aren’t really investments. Like I said above, invest your time, not in insurance policies. Take up the necessary protection, and that’s all you need. It gives you a peace of mind. You’ll be surprised by how uninformed most people are about insurance, and this is one key milestone that will set you apart from many others.

#6 HAVE AN ACTIVE PLAN TO KEEP YOURSELF FIT

Many people don’t even consider physical fitness as a key financial milestone. For what use is it to gain all the wealth you want, yet be unable to enjoy it?

Keeping fit is simple, but difficult to do.

Just like budgeting, many people know what to do, but don’t do it. Get yourself in shape if you want your financial health to be in shape.

#7 OWN THE ROOF OVER YOUR HEAD

Although there are stories of young people who’ve made it big, purchased a mansion with the $150 million they got from selling a company, most people don’t have that luxury. 

The majority of young people work their way to owning their first house, before getting anywhere major in life. When it comes to financial freedom, owning the roof over your head is the least you could do, because when an emergency strikes, you won’t be forced on the streets.

#8 MONITOR YOUR ACTIVE AND PASSIVE INCOME

Financial freedom involves having active and passive income. Monitoring them every 3 months or so is a good way to keep yourself up to date with your progress. It also gives a reality check every few months so that you won’t end up skiving.

A simple excel sheet will do the job. It’s just as easy as monitoring your expenses; most simple apps on the Apple Store of Android Store would do fine. It’s the discipline in keeping the routine that needs to be drilled in.

#9 KEEP 6 MONTHS OF EXPENSES IN CASH

Another defensive safety net; if you don’t even have a 6-month warchest, don’t even think about attaining financial freedom. It takes lots of effort and risk to achieve the goals that you want to set out, and the last thing you want to be worried about is whether there is bread on the table or milk in the fridge.

#10 MEET INVESTORS REGULARLY

If you are a pokemon card game fan, you probably spend most of your time around fellow pokemon addicts. That’s fine if you want to be Ash Ketchum, but if you want to be an investor, hang out around real investors.

Go to events, meet like-minded people, network like crazy, and find out what the scene is like. Know what is trending, what is out-dated, what people are interested in, and by spending time with these people, you will be in sync with the world of investments, and this expands your thinking greatly.

For example, when I first heard of options, it blew my mind; you can actually make money when prices do not move. You don’t have to bet on a rise or a fall; you simply collect premium. I won’t go into much detail, but this opened my mind when I was much younger, and kept me hungry to learn and explore.

Many people fall into a comfort zone once they reach their 30s-40s. It’s normal because the trials of life and the painfulness of toil takes a hit on people, but if you really want that fulfilling life you have, you got to step out and behave like you are going to live a fulfilling life.

Here’s a useful quote for those who are just starting out in the investment community:

If you’re 25, behave like you’re 35. Be mature, sensitive, patient, and be kind in your dealings with people.

On the other hand, if you are a seasoned veteran in your are of expertise, here’s a quote for you.

If you’re 55, behave like you’re 35. Be excited, passionate, willing to change, and accept young people for who they are.

In the past, I was criticized for spending too much time on my phone. Guess what? I now spend most of my time on the phone trading and analyzing charts, and I’m not confined to a desk in an office in Raffles Place. The things which society didn’t really accept, can actually become mainstream in a very short time.

stonesHave you got these 10 mile-stones laid out?
Image Source: Dimitri.co.uk

WHAT’S YOUR DECISION?

If you’re going to make any headway in the path to financial freedom, it had better start today. Make a plan. Go to your drawing board. Stop complaining about the past, and live a life of possibilities. Don’t know where to start? Look for help. Ask, learn, and seek.

But first, make sure you’ve got these 10 financial milestones set up. Of course, you could forgo a few initially, but to be really stable, you’ve got to build up your foundation very strong.

When the storm comes, would your financial house stand strong?

Here’s to a great month ahead, cheers! 😀

 

How Much Must You Save to Have $1M at Retirement? (The Answer is Surprisingly Low!)

a

These days, $1M seems to be the golden figure that everyone aims to attain before retiring. I know there is this great debate about whether $1M is enough, but hey, $1M can get you by for many, many months.

Here’s a table summarizing exactly how much you need to save (or rather, invest) every month, in order to retire with $1M. Using some formulas from my finance 101 class in university,

tableThere you go. I tabulated the figures for easy reference.
Source: MS Excel

It’s one thing to know how much to save monthly, but the real challenge is to get down to doing it.

Here’s 3 tips I have to help you guys attain your own financial goals. They are simple, but you might be surprised how hard they are to actually follow-through with!

 

TIP 1: SAVE MONEY, REALLY.

Yes, save money. This is so easy to say, but difficult to do.

I remember that in my younger days, after receiving my first paycheck, I went out and quickly spent half of my salary on a ‘gift’ to myself, as a reward for seeing the first stack of cash come into my bank account. I quickly learnt that I did not actually need that gift, and that saving money was very, very difficult, especially since you know that your income is certain!

If there was one piece of advice on how to actually save money, it is this: PAY YOURSELF FIRST! It is surprisingly difficult to get yourself to do this, but you must learn to pay yourself first. Paying yourself first doesn’t mean buying something for yourself; it means moving money out from your paycheck into a savings account or investment account on a regular basis.

Perhaps its tough for the first few months, but new habits take time to form and when you actually get down to it, you see that it is a very useful habit to have. In fact, if you have children, it would be good to start teaching them this from a young age. “Pay yourself first, and then spend what you have left” is a good way to instill financial discipline in the younger generation.

Before you ask “How much do I need to save?”, why don’t we just get down to the first step, which is to actually start saving money?

Once you get in the habit of saving, it because second-nature. After doing so for some time, we can move on to the next tip:

TIP 2: BUILD A TRULY DIVERSIFIED PORTFOLIO

Generally speaking, there are two kinds of investing strategies:

FAST money: trading income, bringing in quick gains.

Trading is the way to quickly build up a portfolio and invest in dividend-yielding counters or REITs. Once you’ve stuck to a simple trading strategy, repeating it over time is bound to yield significant profits, much faster than you would in a fixed deposit or by holding the stock index for 5-10 years.

SLOW money: passive income, bringing in smaller but consistent gains.

For those with lots of money, they can allocate much of their portfolio to more stable assets, like dividend stocks, the stock index (it brings a dividend as well!), or other longer-term bonds.

Most people want to use fast money  all through their life, but it is unrealistic. As we age, we have less and less energy and time to continually engage the markets, so the goal is always to have a large war chest that brings in true passive income.

You might be surprised how few people understand the true meaning of a portfolio. Sometimes, the word ‘portfolio’ brings in the idea that you can only buy 5-10 stocks and hold them over 20-30 years. I beg to differ; in a portfolio, one must be truly diversified across…

  • All asset classes (forex, bonds, stocks, REITs, ETFs, commodities)
  • Time horizons (fixed deposits / buy-and-hold dividend stocks VS trading income)

Learning to do so requires some dedication and bumping your head in the wrong places at first. That’s why I always recommend that beginners take up forex trading; they’ll be exposed to market volatility, intra-day and longer-term trading, and also different asset classes by trading oil, gold, wheat, the stock indices, and bonds. Furthermore, you need as little as $500 to start with, and the cost of failure is very low.

 

TIP 3: STAY CONSISTENT

It is remarkably difficult to do something simple over and over again.

Want to lose weight? Exercise and eat healthy. But how many people actually keep to this?

Want to become better at socialising? Spend more time with people rather than with your phone or computer. But how many people actually keep to this?

Want to learn to trade? Stick to 1-2 trade setups, and repeat these trades week after week. But how many people actually keep to this?

It is very, very difficult to do what is simple and boring. In fact, it is the boredom that kills most traders!

One thing that experienced traders fail to do that knocks them out of the game is this: they fail to keep reading, reflecting, and honing their craft.

Continuous learning has to be part of your investing plan. After all, most people only want to invest money, but don’t want to invest the time to learn how to be profitable.

How much returns is good returns?

Well, that depends on your goals. There is a trading strategy for every level of returns. A conservative 10-20% returns as a trader is possible and you generally take a lot less risk than someone who wants 100-200% returns a year.

Depending on when you want to retire, you need to find out how much % returns you need a year, and look for a strategy that gets you there.

 

IT’S BORING, BUT YOU NEED TO TRACK YOUR PROGRESS!

how-muchWith a Google search, I found a useful table to track your progress, credits to businessinsider.sg! Source: BusinessInsider.sg

Suppose you want to save $1M, it’s extremely important to track if you are on target, and see if you need to allocate more funds to fast money or slow money.

If you are proficient with MS Excel, you should be able to come up with a table for your income, expenses, savings, investment returns, and projected net worth by whatever year that you are aiming to retire by.

I hope this article brings you to your feet and gets you started on your quest for financial freedom. Maybe for you, the first step is to actually start saving money! Starting where you are is all you need to do. With every step you take, you’ll be one step closer to your goals.

Cheers! 🙂

RESEARCH SOURCES & REFERENCES

businessinsider.sg/compound-interest-monthly-investment-2014-3/
businessinsider.com/retirement-savings-guide-2014-3?_ga=1.199140719.1988080035.1478087095

 

Top 3 Reasons Why You Should Start Investing in 2017

copy-of-copy-of-not-allthose-who-wanderare-lost

Brexit, Trump, Italy, asset bubbles all over the world… you name it, there’s probably some financial market jitters that keeps most people out of the world of investments.

On the flipside, the financial world often quips about some investment that has made xx% over a certain period of time, trying to entice visitors with a glimpse of the profits possible for anyone. In the world of investing, it is easy to find spectacular returns on hindsight, and salesmen go through great lengths to market what has already happened.

As traders, we live in a constant state of uncertainty. Every trade we make has the possibility of going wrong, and this is taken into account when a decision is made. It is the knowledge of this that gives power to a trader; if he can understand the math behind his investment decision, he can have a positive expectation and a positive traders’ equation.

There are three main reasons why trading is even more attractive these days. Indeed, with advanced technology, there has never been a better time to step into the world of finance, and grab a golden egg while you still can.

GOLDEN EGG 1: TRADING GIVES A HIGHER INTEREST RATE THAN BANKS

fdThe best you can get on a fixed deposit is 0.35% a year in Singapore, as at December 2016.
Source: moneysmart.sg

While inflation is a constant enemy for our savings accounts, most people do not know what to do to combat inflation. The most common quick-fix is to work harder and earn more money. While that does feed us and our families for some time, the need to build a war chest for emergencies becomes more and more real.

 

How much can you make from trading? Institutional traders bring in a success rate anywhere from 30%-70%. Why is this so?

The greatest insight into the markets that can make you profitable is this: 90% of the time, the odds are 50-50, while 10% of the time, the odds swing 60-40 (slightly in your favor).

That’s right. While most of the time, markets are 50-50, it is those brief moments when the market gives some opportunity, and prices quickly move to take advantage of this opportunity. That means that if you were to buy or sell randomly, you already have a 50% chance of success!

Another insight to know is that a high success rate (hit-rate) brings a lower profit target, while a low success rate brings a higher profit target.

What do I mean by this? Institutions trade using a combination of low-probability and high-probability trades.

Example: 40% (low) success rate, win = +2%, lose = -1%.”

low

In this case, if you were to make 100 of such low-probability trades, you would make +80% on winning trades and -60% on losing trades, bringing a 20% return on capital.

Example 2: 75% (high) success rate, win = +0.5%, lose = -1%

high

In this case, if you made 100 high-probability trades, you made 37.5% on winning trades and -25% on losing trades, bringing +12.5% return on capital.

It is impossible for the market to give high-probability trades with a high profit potential. This would be quickly detected by institutional traders, who have mathematicians, PhD staff, and computer science experts who can quickly make adjustments and profit from it. With hundreds of millions of dollars at stake, these people would do all they can to bring profits for their firm.

 

That is why if anyone quips that they have a 80-90% success rate, they are probably having many small wins but a few gigantic losses. If you don’t believe me, try trading forex and planting random trades with low profit potential and high loss potential. The numbers indeed prove to be true!

That is also why it is important to understand the traders’ equation. With a reasonable success rate and an appropriate win-loss ratio (or risk-reward ratio, RRR), you would be profitable over the long-run.

I have had days where I ran 7-8 trading losses in a row, but because I trusted in the probabilities, the next 3-4 trades ended up profitable, as long as I stuck to my trade setups and didn’t let the emotions get the better of me.

GOLDEN EGG 2: TRADING DOES NOT REQUIRE LOTS OF CAPITAL

If you have $500 to invest: trade forex.

In the Forex market, you are entitled to ‘get a feel of the game’ by risking a few dollars per trade. By trading the smallest lot size (0.01 lots), you can learn to make a few dollars here, lose a few dollars there, and rack up trading experience and learn to trade ‘live’ without incurring hefty losses.

By learning to make many decisions and experiencing all the different conditions of the market, you would become seasoned enough to trade a bigger size, and fine-tune your own trading strategy.

Many traders discover they have certain characteristics about themselves that hinder success. In trading a ‘live’ account with a small sum of money, they are putting in some skin in the game, and getting used to the ups and downs of their account.

The best part about forex is that there are no commission charges. The broker makes money from the bid-ask spread, which is the difference between the buy/sell price, and most brokers charge reasonable spreads, allowing you to trade with almost negligible transaction cost.

If you have $3000 to invest: explore stock CFDs.

Stock CFDs have low commissions and can be bought in small quantities – a few thousand dollars can allow you to have a portfolio of 5-10 stock positions.

For people with less time and more money, stock CFDs can be a great way to learn to deal with commissions, spreads, fee structures, and the whims and fancies of the stock market.

The stock market is only open during working hours, unlike the forex market. Someone who is interested to take longer-term positions may be open to trading stock CFDs, risking small amounts of money, and yet racking up trading experience.

Some people quip that the forex market is more difficult to trade than the stock market. I beg to differ, because it is your circle of competence that determines your success, not the actual characteristics of the market.

If I were to ask you to drive a Formula 1 race car, you probably would kill yourself within the next few hours or so. However, if you were progressively taught how to drive the race car, it doesn’t become dangerous, and because of the progressive nature of your learning, the high speeds don’t come as a shock to you.

f1Driving this car is dangerous, only if you are not trained.
Source: wallscorner.com

Many people get shocked at the speed by which forex markets move during the Non-Farm Payroll Announcements and FOMC Interest Rate Announcements; prices can move 10-50 times faster than normal during those crazy periods! However, with practice, these sessions can become a profitable time for traders with experience and proper risk management.

If you have $10,000 to invest: trade everything.

People with more money have the luxury of trading a combination of stocks, forex, commodity, bonds, and index trades. These can be accessed through any decent forex broker, and you’ll be surprised to find that most forex brokers let you trade forex, oil, gold, the Dow Jones Index, the S&P, the bond markets, wheat, corn, natural gas, and more. These of course come with higher margin requirements, but exploring all the asset classes makes you a seasoned, well-rounded investor that can take any market condition.

Sideways in the forex market? Maybe there is a trending opportunity in the oil market. There’s always something to trade if you have the experience and know where to look.

However, in my opinion, the greatest investment is Golden Egg 3.

GOLDEN EGG 3: TRADING BOOKS ARE CHEAP AND EASY TO FIND

John Murphy: Technical Analysis of the Financial Markets. One of the great trading classics that builds a strong foundation.

John Murphy’s book on technical analysis reveals the fundamental nature of financial markets. Prices move in patterns and cycles, and understanding history helps you to cope with what is to come.

In my trading journey, I’ve read more than 200 books, and found only about 11 of them that are useful in my trading career. These books were either borrowed from the library, or bought only for $30-$50 a book, which is a very good price (since stock commissions can be $15-$25 already!).

Buying a few good trading books can completely change your destiny.

If you are starting out, why not invest in 3-5 good trading books, before getting your hands wet in the financial markets? These books would build a strong foundation, and you would start off with a better understanding of why things happen.

bookSome of the more famous online bookstores.
Source: Company websites

Amazon.com and bookdepository.com provide great options and they ship almost anywhere in the world. Personally, I found that bookdepository has the more exotic books, but it is a little pricey (yet still worth it since you can’t find the books easily!)

Second-hand books: Carousell if you live in Singapore! If you’re lucky you can find good books at a discounted price. Even though the books may be a little dusty and yellowed, it’s the content that you want to really absorb. You can always find what you want if you search hard enough!

TRADING & INVESTING EDUCATION IS WITHIN OUR GRASP

If you are still thinking about it, here’s why you should pick up investing education:

  • Historical chart data is free (we used to need to pay in the 1990s and 2000s)
  • Free resources are available
  • Books are cheap and easy to find
  • Starting cost is as low as $500
  • Cost of failure is low
  • Experience can be racked up with very little capital
  • There is a market for every type of investor

And most of all, it can bring higher returns in the long-run than placing your capital in the bank account. Sure, you might risk losing a couple of dollars at the start, but the cost of ignorance is a lot higher when compounded over the next 5, 10, or 20 years!

Wishing you all the best in your trading journey, and I do hope this article serves as a pump to start you on your quest for investment expertise!

Cheers!

 

RESEARCH SOURCES & REFERENCES

http://www.moneysmart.sg/fixed-deposit
http://www.lifehack.org/articles/money/15-best-online-bookstores-for-cheap-new-and-used-books.html