Understand behavioral science and psychology to boost your consistency

3 Dangerous Myths About Trading that Could be Affecting Your Profitability

The world of finance and investing is filled with opinions, news, jargon, and sometimes pure nonsense. It is only the people who actually make trades, who will be able to tell the truth from the lies.

After all, an opinion has no consequence. People can quip about what they think is true, if there is no money on the table. However, when you’re trading with your own money, you’re forced to confront the reality of things. I, for one, am no stranger to taking risks, but I only take calculated risks with a high payoff. That is what trading is all about.

Without further ado, here are 3 dangerous myths that could be wrecking havoc on your trading account:

 

MYTH #1: TRADING WITH LEVERAGE INCREASES YOUR RISK
(Reality: Trading with leverage reduces capital required, but risk can be kept the same.)

Let’s tackle the myth first; the media handles the idea of leverage very poorly, because it often sensationalizes the trader who over-leverages and blows everything.

The idea is simple: I have $100, and I leverage so that I can trade $500 or $1000 of stock/forex. I make one bad trade, and I’m wiped out.

This is true for the person without proper risk-management. After all, the temptation of leverage is to dump all your money into one trade, max out the leverage, and hopefully you make 500% on one trade and can call it a day. The truth is, these lucky trades do happen in reality. Eventually, the trader with his newfound wealth (and greed), piles his money into another trade, and loses everything.

Leverage kills the person who abuses it. It’s like fire; it can cook food for people, or it can kill people.

 

Leverage, in practice, actually keeps you disciplined. In forex trading, maximizing leverage is actually a wise way to start trading. When you leverage, you are actually committing less margin to a trade, and you can get comfortable with trading by committing as little margin as possible. Here’s what I mean:

For example, suppose you have a stop loss of -$10 and a target profit of +$30, and you make a trade of unknown size X.

1:100 leverage – Margin committed for X lots = $102.50 (I’m making this up)

1:500 leverage – Margin committed for X lots = $20.50 (five times smaller)

In the case of higher leverage, you stay comfortable because even though the stop loss is -$10, you see that the margin committed on your account is only $20.50. This allows you to not have to see the wild fluctuations in margin requirement, and keep you trading small and trading often.

There are several benefits to leverage that most people don’t know about.

Also, trading with higher leverage allows you to take multiple positions with little capital. This is great for beginning traders who want to experiment and take multiple trades with a small account. With as little as $500, you can take 3-5 forex positions with leverage, risking anywhere from $5 to $20 or so for each trade. This is a great way to start for aspiring forex traders.

 

MYTH #2: BROKERS ARE OUT TO HIT YOUR STOP LOSSES
(Reality: You get stopped out because of the market, not because of the broker.)

Many people who have been trading for some time get convinced that the broker wants them to be stopped out of their positions. I’ve heard of this and seen it happen; the trade hits your stop loss, then immediately goes in your favour and flies in the direction you want, and then you beat yourself up and say “I was supposed to make $XYZ on this trade but I got stopped out because of the stupid broker!”

The truth is, the broker has better things to do than to keep hunting the stoploss on your account.

At least, this is for brokers who want to remain in business over the long-term. How do brokers make money? They make money if you keep trading. Why would any broker want you to stop trading? They would actually want you to be profitable, because for every trade you make, they get a small cut from the spread (also known as the bid-ask spread). Essentially, they want you to love trading and trade so much and so often that they get large revenues from spreads.

Why in the world would the broker want to stop you out? The reason why we get stopped out, is because we are bad traders.

Professionals are buying or selling exactly where your stop loss is placed, because they know that the average investor would place their stop loss there.

The solution to not getting stopped out, is to first acknowledge that trading involves some positions getting stopped out. Being right 40-50% of the time is already sufficient for you to be profitable, so don’t be surprised if half your positions get stopped out.

One example is a sideways market. Beginners love to enter on sideways markets because it presents many signals in both directions. However, professionals are buying and selling at the extremes of the sideways markets, causing beginners to get stopped out repeatedly, while professionals make money repeatedly. Remember that there is another trader on the other side who is filling your order; if you are losing money, it is because someone else is taking money from your account, and putting it in their account.

MYTH #3: FOREX IS MORE RISKY THAN STOCKS
(Reality: Risk is independent on the product, and forex actually requires less capital.)

In a previous blog post, I mentioned this: If you have $500 to invest, it actually makes more sense to trade forex.

In the Forex market, you can ‘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 to become profitable in the long-run.

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, making the ‘tuition’ fees a lot less than trading in stocks.

I’ve spoken about this at length in my previous blog posts. Besides the lower cost of trading forex, you actually lower your risk by getting better at trading. After all, the biggest risk is yourself. If you’ve got skin in the game, made a few hundred trades with real money, and got yourself a strategy that you can rely on, you are actually a lot less a risk to yourself.

24/7 market; choose when you want to trade.

The great thing about Forex is that you can decide when to trade based on your schedule. That helps people who have punishing schedules: trading in the middle of the night, or during lunch, on a daily basis, works out to a trading schedule that accommodates your lifestyle needs.

Stocks have bigger gaps between bars than Forex does.

Furthermore, with regards to stocks, stocks tend to see bigger gaps between days. Here’s what I mean:

forexForex pairs/currency futures tend to have less gaps between bars; bars close and open at roughly the same price. Here, the chart of NZDUSD (daily).

stockMost stocks have gaps between the candlesticks/bars. Notice how there are many ‘holes’ between bars for First Majestic Silver Corp (NYSE).

Gaps make the analysis a little more complex, because you have to take into account the size of the gap along with the actual candlestick printed on the chart. Forex allows you to employ technical analysis more simply, and learn how to read price action without the distraction of having to figure out what the gap means. Of course, this isn’t a problem among more liquid stocks like the SPY, C, MCD, FB and other “famous” counters.

WHAT’S THE REAL RISK?

The real risk in trading lies with the trader. The moment you stop improving, stop learning, stop growing, or stop challenging yourself, you’ll start to see your profits suffer. I encourage all of you aspiring traders to seek the truth, and rely less on opinions in your trading journey. After all, you can only find out the truth when you’ve got some money on the table, and actually start to make trades.

WANT TO GET STARTED IN TRADING?

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6 Little-Known Things that Rich People Do Differently that Give Them an Unfair Advantage

Many people do not realise that small things add up. Like how a small river can cut through rock and form grand canyons, small habits can add up over time to produce vastly different results. This means that quite often, a small change in the way we do certain things can result in huge leaps in improvement. So here are some things that rich people do differently:

1. MAKE MANY SMALL & FREQUENT WINS, NOT A FEW BIG WINS

1

Trading is boring. Ask any seasoned trader in a proprietary fund, and they will tell you the same thing. It’s all about doing the same thing over and over again, and it is surprisingly difficult to do something simple over a very long period of time.

Some of the richest people I know own very humble businesses. One example is the typical food hawker; it’s unexciting, it’s repetitive, but hey, it gives a very stable source of income, week in, week out. It is virtually impossible for good food to become irrelevant to the typical consumer, and hence this source of income is one that will last a long time.

Too bad they ran out of the small lobster bowls, but I’ll definitely be back! 👍😄🍴 #sumoprawnnoodle #prawns #lobsters

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

In trading, it’s the same. Small wins add up over time, and instead of being diligent, many aspiring traders choose to take the easy way and just look for that one quick way to make money. Although the news always glorifies the one-hit wonders, like Zuckerberg and other billionaire tech founders, the majority of the rich are not overnight successes, and they know this rule best: small wins add up over time.

 

2. THINK IN % ROI, NOT DOLLARS OF INCOME

Compounding is the way to go. Although you might be nauseating because this is probably the 100th article on the power of compounding, it really works. Just take a moment and think with me:

Nobody would learn trading if you claim to make $10 a day. They want $100 a day, $1000 a day, but forget that it starts with $10 a day.

That’s why most people fail to achieve financial success. They measure monetary success in dollar terms, and fail to consider that ROI is what brings true riches over the long-run.

Thinking in ROI is a very huge barrier for many people, and it actually benefits you because when you finally do make a substantial sum of money, you will still be thinking in terms of ROI and not be overwhelmed by the huge amount of funds on your plate.

I’ve seen many traders do well on small accounts, only to blow up with larger accounts because they have not drilled the ROI concept deep into their minds.

If you can make 3% a month, that’s $30 for a $1000 account, $300 for a $10,000 account, and $3,000 for a $100,000 account. Go figure. If your focus is on % ROI, you will not have an issue growing your wealth quickly.

 

3. STAY AWAY FROM ALL FORMS OF GAMBLING

This point is probably the easiest to write about:

Gambling = negative expectation

Investing/trading = positive expectation

I bet I can stop gambling!”

Gambling gives you hope, which is false and always gets dashed.

Investing gives you certainty, which is true and rewards the skillful.

I think that’s enough said. If you’re gambling for the thrill, treat it as expenses. As a trader I always think in probabilities, so since the expected return from gambling is negative, the rational decision is to not participate at all.

In addition, 1 in 5 gambling addicts attempt suicide. It destroys your family, your friendships, your sense of sanity, and your work ethic. I think it’s enough to let you realize it won’t get you rich; even the seemingly innocent TOTO or 4D that you buy is not a rational attempt for someone to earn big money.

 

4. TIME IS WORTH MORE THAN MONEY

Quite often, people will go to great lengths to save money, for example spending hours hunting around for cheap shopping deals, when all you save for your hours of effort is a mere $10-20. Rich people know the value of their time.

One important question to ask yourself is, “what is the $ value of 1 hour of your time?” If 1 hour of your time is only worth $2, then spending an hour queueing up for free ice-cream might make sense. However, if one hour of your time is worth $200, then taking a $20 cab ride to save an hour of transport will make a lot of sense. You get the idea.

At this point, you might have realised that one if the key ways to increase your net worth is to gradually work your way up by increasing the value of your time. After all, everyone has 24 hours in a day, but the more value you can create in one hour of your time, the higher you will be paid for it, and the higher the value of that hour will be.

 

5. DON’T WASTE MONEY ON CHEAP STUFF – ONLY BUY QUALITY GOODS

It’s sad that most people are thrifty in things that do not matter, but silly when it comes to investments of thousands or hundreds of thousands of dollars. I’ve seen people scrimp on their daily meals, yet when it comes to investments, blow $50,000 on an investment fund they do not understand, or buy into a multi-currency deposit that doesn’t even make sense.

Home purchases, which make up the bulk of most people’s expenditures, tend to be bad decisions. People buy houses that they cannot afford, spend money on renovations that don’t matter, and waste money where it doesn’t bring returns.

1Most people are smart with small sums of money, but unwise on big decisions

Rich people buy things that appreciate in value, while poor people don’t. Electronics generally don’t appreciate in value. If you consider buying electronics, buy quality electronics, and keep them in tip-top condition so that you can resell them at a decent price. And… just because it’s the latest gadget doesn’t mean it’s quality. You’ve got to do your research and think about your purchases if you are serious about your money.

Wine does appreciate in value, and so do quality branded goods. Some Louis Vuitton bags appreciate in value, and it would do you well to consult experts if you are intending to use these products.

Other things that are not worth spending on include:

  • fast food
  • low-quality makeup
  • gifts that don’t really matter
  • alcohol
  • bottled water
  • cheap shoes/clothing that you throw away within 6 months

Yes. It might hurt to read this, but if you need a total personal finance audit, then it helps to do a reality check on yourself.

 

6. LASTLY, RECOGNIZE THAT PERSONAL DEBT IS A SHACKLE

Personal debt chains you from spending on what really matters. In the U.S, many undergraduates end their college years with US$100,000 and above in personal debt. How in the world would they be able to start a family, much less get a home to live in?

In my opinion, the only useful loan is the humble HOME LOAN. Yes, a loan for the house you actually live in, not the house that you would not live in. It is essential to have a roof over your head that you own, because when your business fails, when you lose your job, you still have somewhere to rest and find solace while you sort things out. The worst thing you can find yourself in is having no house, no money, and no one to support you at your lowest moment. Using debt to buy additional houses is a bad idea unless you are a real estate investor by profession and you know what you are doing.

Car loans are unnecessary. Unless you have a dire need for a car, buy the car in cash as much as possible, or just take a taxi everywhere since you can afford it anyway. Credit card loans are the jaws of death for many; stay away from them, and just follow the simple mantra of  spending below your means”. 

Spend below your means, but also look to expand your means.

Too many people get stuck in the “spending below your means” mentality, and fail to consider how they can acquire more sources of income. In fact, having no personal debt frees you to make decisions that allow you to work towards financial freedom, which may require you to have no income for months or years in a row.

 

WHAT SHOULD I DO?

I hope that these 6 tips will get you toward your goal of financial freedom. Keep at it! Remember, if you change your habits, you will change your outcomes. Live like the rich do, and you’ll soon be living the life that the rich do.

Reading this article without putting the tips into practice is like looking into a mirror and forgetting what you look like. It might hurt at the start, but changing the way you live could very well change your destiny!

Wishing you all the best in your journey!

P.S. If you are keen on picking up some investment and trading skills which you can use to generate additional cashflow and grow your wealth more quickly, I will be holding a workshop to share how you can build a portfolio from scratch, and how you can use my 4 proprietary trading strategies to trade any market effectively for more cashflow. Special $25 workshop promotion:  http://wp.me/P1riws-6gw

 

RESEARCH SOURCES & REFERENCES

sbr.com.sg/commercial-property/commentary/state-industry-rise-self-storage-in-singapore
businesstimes.com.sg/hub/property-2016/self-storage-industrial-space-poised-to-expand
nreionline.com/self-storage/self-storage-sector-maintains-steady-growth
alternet.org/how-gambling-can-kill-you-faster-drug-abuse-or-alcoholism
wondergressive.com/20-biggest-wastes-money/

The 10 Financial Milestones that Every Singaporean 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 Singaporean 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! 😀

 

3 Insanely Profitable Traders You Probably Never Heard Of – What Makes Them Different?

When people think trader, they think rogue trader Nick Leeson. 20 years ago, a single derivatives trader caused Barings bank to collapse, leading to many quickly labelling forex trading as an evil profession.

Here’s a photograph of that historic event when it happened:

1Source: The Guardian

As most people know, proper risk management would prevent failure on such a catastrophic scale. At the same time, it is unfortunate that some of the most famous traders in the world shot to fame as a result of one big trade that normally rocks the headlines. This results in some traders having the mentality that they just need that one big winner to retire comfortably.

Let’s take a look at two famous examples:

GEORGE SOROS – BREAKING THE BANK OF ENGLAND

Soros famously made $1 billion from shorting the British Pound. This was what made his name famous and he was named the man who “broke the Bank of England”,  apparently due to him shifting (or shorting) $10 billion dollars worth of currency.

ANDREW KRIEGER – TRADED BIGGER THAN THE NZD MONEY SUPPLY

Andrew became famous when he shorted the New Zealand Dollar of almost $1 billion in value,  which was more than the money supply in circulation in New Zealand during that year! Andrew ended up garnering $300 million in profits from this single transaction alone for his trading firm.

We know that these two traders had trading accounts that were unbelievably large. This is not the case for almost all of us. Therefore, we need to gain the skills and knowledge that can bring consistent, decent returns on an average trading account size. The key is to look for sustainability, and this is definitely learnable.

“Trading is not about getting a one-hit wonder. It’s a career decision, and requires as much commitment and passion as building a business.”

Below, I’ve picked out three excellent traders who I believe will change the way you think about trading.

How many of you can recognize these faces? 😀2Source: philanthrophyroundtable.org, tastytrade.com


EXPERT TRADER #1: TOM SOSNOFF

1Tom Sosnoff sharing option strategies on his daily financial show with his daughter
Source: Tastytrade

Tom Sosnoff started off as a political science graduate working in the Chicago Options Exchange as a market maker. An industry veteran, he quickly spotted the market opportunity in online option trading, and co-founded and created the famous Thinkorswim trading platform. He later sold it to TDAmeritrade for a handsome sum of more than US$600 million.

A maverick of sorts, he is currently most famous for his financial network TastyTrade, where he shares professional trading strategies relating to derivatives and covers topics that are extremely difficult, such as advanced option greeks, and also the very basic. He exhibits some traits that are very rare and valuable to a trader:

  • Substantial and deep trading expertise.

Sosnoff’s knowledge of his area of specialization is admirable indeed. If you are familiar with options, or consider yourself a veteran in the options arena, you might want to think twice after knowing how much expertise he has garnered.

If one wants to make it in the trading arena, one has to be absolutely familiar with the tools of his trade, and the lingo used by industry practitioners. Forex traders, for example, know the ebb and flow of orders throughout the day, such as the Asian/European/American session, and can detect upcoming volatility even before it strikes. For price action traders, the trader can become so proficient that he knows when to stay out of the market within a few seconds.

  • Sharp business acumen.

A trader is ultimately a shrewd businessman. His trades are merely expressions of his ability to spot opportunities for profit, and he quickly knows if he has made a wrong decision. When he is right, he presses his bets and makes the most out of it. Just as a professional poker player knows the odds of every single set of cards dealt to him, a trader knows the odds of every market situation presented to him.

“If you can play poker well, you can probably trade well. Every trader is a shrewd businessman at heart, placing bets where it matters, with reasonable, sound analysis.”

The trader is also absolutely clear of his strategy. Trading without a strategy is as good as flipping a coin, but with a clear plan for attack and defence, the trader is able to defend his account and successfully build his net worth in the long term.

  • Continuous growth.

In his daily financial shows, Sosnoff quips that he has learnt far more in his years explaining option trading concepts, than he learnt while being a professional trader and market-maker in the days of the exchange floor. His team continuously churns out data and statistics on the probability of different option strategies, ranging from basic ones like naked put selling, to exotic strategies like jade lizards and the like.

“Perhaps the reason why most traders fail is they fail to see themselves as entrepreneurs.”

The ability to continually analyse his strategies and develop his domain knowledge is the key to his continual success. Where many of his peers in the trading floor days have left the industry, unable to keep up with the fast-paced world of online trading, Sosnoff has soared way above and carved a niche for himself.


EXPERT TRADER #2: BRUCE KOVNER

3Bruce Kovner with his wife
Source: The Kovner Foundation

Kovner made his first trade on credit, borrowing money to execute a soybeans futures trade, where he made $23,000 on a borrowed sum of $3,000. He was interviewed in the famous book ‘Market Wizards’, and in 2003 he reportedly ran an $11 billion dollar hedge fund named Caxton Associates. He is a rather low-profile guy and shuns media attention.

“I have no bias toward any of the markets… I am just as happy a trader in a bear market as in a bull market, rates up or down, commodities up or down.”
– Billionaire hedge fund manager, Mr. Bruce Kovner

  • Develop a strategy that you are comfortable with.

Kovner’s hedge fund trades based on global macroeconomic conditions. In the hedge fund world, this is called macro-trading, and is a common way to manage a large portfolio. His unique approach to the markets has earned him 28% per annum over more than 20 years (every single year!). Just as he says in the quote above, he is comfortable trading any kind of market, in any kind of condition.

  • Really understand what causes markets to move.

Fundamentally, institutions and banks move money because of their view on global macroeconomic conditions, and they express this in the form of price action, demonstrating commitment through their buying and selling.

Although most small traders don’t have the luxury to express their view of the economy with hundreds of millions of dollars, it helps for us to understand where the world is heading toward, so that we can ride on the moves of the institutions.

For example, you may have heard of the famous saying “The trend is your friend.” Sure enough, as long as the trend is clear, it shows that institutions are piling into the particular financial product that you are trading. You don’t argue against a trend; you flow with what the majority of market players are doing. The context of the market is far more important than the trading signal; just because you see a bearish candlestick pattern does not mean it’s a wise trade to short the market – you have to see whether the surrounding price action supports your trade idea.


EXPERT TRADER #3: LEWIS J. BORSELLINO

4Borsellino trading in the pits as a young man.
Source: Tastytrade

Lewis Borsellino came out of a troubled past. As a young man, he had to live with the shocking murder of his father and having to deal with emotional blow while working at the Chicago Mercantile Exchange. He started off as a runner before becoming a formidable opponent in the S&P futures pit. At one point, he claims that he traded so large that market participants looked to him as a sign that the market was going to turn. Apparently, his trading volume accounted for as much as 10% of total trading occurring in the futures pit!

  • Get very, very good at what you do.

His confidence on the pit was astounding. He knew what he was doing, and traders around him could feel it. In those days, the expression and emotional state of the trader contributed to the mood around the arena. With electronic trading, this plays a less important role, but the market still expresses itself with price, and the despair and ecstasy of traders can be understood if you examine price very carefully.

He almost exclusively traded the Standard & Poor’s 500 pit during his 19-year career on the trading floor.

“I was very good at what I did.”
– Lewis Borsellino

Many people use multiple indicators, hoping to quickly find a system to get good as a trader. However, what works is to be very good at at most 1 or 2 indicators, or simply trade with no indicators, so that you can gain the most expertise and be familiar with what really matters.

In the proprietary trading world, some traders only use Level 2 quotes, trade ladders, without any charts! There are other traders that make portfolio allocations, while there are some that engage in high-frequency intra-day trading. It does not matter how you get there; once you have selected something, you need to get very good at what you do.

Now that we’ve covered the lives of these three traders, let’s take a closer look at trading as a possible career path.

TRADING AS A CAREER – WHAT DOES IT REALLY TAKE?

Many traders are frustrated with their trading results because they don’t change their behaviour. They make many, many trades, but fail to ask the right people and seek the right guidance, causing them to make the same mistakes over and over again. If you do what you always do, you will get what you always have been getting.

Lewis Borsellino left the trading floor and entered online trading. Initially, he backed a lot of floor traders financially and groomed them to become profitable, but as time went by, he saw the opportunity in backing both floor traders and online traders, and forced himself to re-learn trading with charts.

If you are still unprofitable in the trading arena, what are you willing to do to make things work out for you? Change your actions, and you will see change in your results!

Anthony Robbins says this really well:

3Source: Goalcast

Perhaps you are someone considering trading as a possible side income, or even as a career. It takes dedication (time!), expertise, patience, as well as some street smarts in order to become a professional trader.

“If you are considering making a career switch to trading, what are you willing to do to make it happen?”

 

RESEARCH SOURCES & REFERENCES

https://www.theguardian.com/business/from-the-archive-blog/2015/feb/24/nick-leeson-barings-bank-1995-20-archive
http://www.forbes.com/lists/2006/10/6OQE.html
http://archive.fortune.com/magazines/fortune/fortune_archive/2003/09/29/349918/index.htm
http://www.derivativesstrategy.com/magazine/archive/2000/0300qa.asp
http://www.investopedia.com/articles/forex/100515/these-are-most-famous-forex-traders-ever.asp

Personal Checklist: The Top 5 Habits of Singaporean Self-Made Millionaires

Just last week, I came across this interesting article, talking about some of the prominent millionaires in Singapore, and how they created their wealth.

vulcan-postSource: Vulcan Post

As I read it through, I couldn’t help but think about what they did to make, keep, and grow their wealth. Sure, some of them inherited their wealth, but it takes a different kind of education in order to preserve and grow the inherited wealth.

It is definitely not chance that these people have achieved phenomenal success. There were, in fact, common patterns of behaviour that keep them successful.

The difference lies in just 5 actions they take consistently:

1. THEY CREATE MULTIPLE INCOME STREAMS

The average person lives from paycheck to paycheck, while the average wealthy person receives cash from various sources, so that even if one source were to be temporarily cut off, they can still enjoy the same standard of living they currently have. Here are just some of the commonly known income streams that they have:

Earned Income: working for money

Interest Earned: earning money by lending it

Dividend Income: earning money by share ownership

Profit: Selling something you make or own

Capital Gains: Selling something higher than what you bought it for

Rental Incomes: Money gotten from owning real estate

Royalty Incomes: Money from selling intellectual property or franchise systems

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Having multiple streams of income is like having many waterfalls flowing into the same ocean. The more streams you have, the more reliable the flow.

Which do you currently have? The average person struggles to survive because he only has one stream. Personally, I like trading and portfolio management. The great thing about portfolio management is that you can enjoy interest earned, dividend income, and capital gains.

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2. THEY TREASURE EVERY SECOND OF THEIR TIME

Let’s be honest with ourselves; how many hours a day do you do things that do not contribute to your financial success? Most people would rather procrastinate or spend time on enjoyment rather than on what really matters.

I found this really interesting image of how most people spend their time in a year:

4Source: The Visual Communication Guy

It’s amazing; out of 365 days a year, 183.7 days are spent on media! If we were honest with ourselves, perhaps what we need is to rethink the way we live. Perhaps if we all take some time away from Media and reallocate it to self-improvement, learning, investing, and growing as a person, we could be living a very different life indeed.

How would your life look if you re-arranged your priorities?

Robert Kiyosaki once made a quip about what he noticed of rich and poor dads; he said that poor dad would sit on the couch and watch TV every night, while rich dad would review his investments and upgrade his skills every night. Poor dad would spend the weekends wasting time, while rich dad would build a business during the weekends.

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Many of you would know that I read more than 200 books before I embarked on my trading journey. Even now, I make it a point to read at least 3 books a week, because I feel that it is important to never stop learning and upgrading oneself. Here are some key pointers:

  • Don’t waste time. Find out what you need to do, and do it.
  • Re-prioritize. Find out which areas of your life you can do away with, and cut them out quickly.
  • Learn. Just because you have graduated doesn’t mean you should stop learning. Successful people get where they are because they have an attitude of lifelong-learning.


3. HAVING A MENTOR MAKES A BIG DIFFERENCE

Mentors are looking for people who are humble, hungry, and hard-pressed for success. No matter where you are in your career or life, it helps to have successful people to reach out to and learn from. They’ll be able to quickly point you in the right direction if you are going off-track.

When I started my trading career at a professional fund, I had wonderful, experienced mentors to guide me in the right direction. I quickly picked up on what worked and what did not. I learnt their habits, their lifestyle, and the difficulties that they went through to get where they were.

Where can you look for mentors if you have no one at the moment? This is what many people ask me from time to time.

  • Build connections: Networks are not built overnight. As you expand your social circle to include successful people, you will start to find people who could potentially guide you to where you want to go.
  • Be inquisitive: People will only want to mentor someone who has the attitude for success. While at the beginning you might lack aptitude, the right mentality and motivation would attract the right people to you.
  • Keep learning: As you learn more, you discover you will have the vocabulary to connect with people. With greater proficiency, you would be able to speak at the same level as industry practitioners, asking smart questions, being able to understand jargon, and make an impression.


4. THEY VISUALIZE THEIR DREAMS IN DETAIL

Goals without dreams are dead; they become mere tasks rather than the exciting outcome that you hope for. It helps to have an idea of what you want; most people want to be wealthy but don’t know what it would look like.

What does a wealthy life look like for you? For YOU personally?

For some, it could mean having to work only 2-3 days a week. Financial goals differ from person to person, and it’s not just the monetary goal, but also the lifestyle goal. For me, I knew I wanted to have the luxury of making passive income even when I am travelling. This may not be everyone’s goal.

“How much money do you want to make exactly, and what would that lifestyle look like exactly?”

Many people want to lose weight. Losing weight isn’t a definite enough goal; Losing 12 kg by the end of 6 months is a definite goal. Many people fail to achieve their goals because they don’t even define their goals!

It’s also important to visualize yourself doing what you hope to be doing. Having a lot of money is pointless if all you are going to do is sit aroud with the cash; it is accomplishing the goals you have, those bucket lists, that make life worthwhile.

So what is it for you?

Grab a piece of paper and start getting your hands dirty. It doesn’t matter if you are old or young, experienced or inadequate; what matters is a willing heart and dilligent hands, and of course, a big enough dream that will knock you off your sofa and get you started.

  • Be specific about your goals. General goals generally don’t work. Specific goals help you to move toward exactly what you want.
  • Keep track of your progress. You never know if you are on the right path if you don’t take stock regularly. Even better, get a mentor to help you evaluate where you are.
  • Focus on the dream with its details. Keep reminding yourself of where you eventually want to be. Otherwise, you’ll just lose steam and burn out, bum around, and end up not getting where you were heading toward.


5. THEY DO NOT GIVE UP OR QUIT

If you’ve got your foot into the investing arena, you would be familiar with financial losses. It is at this point where your mettle is truly tested; is this what you want? Are you willing to sit through heartache and tough lessons to get where you want? Is the life you left behind really worth going back to? Do you still believe in the dream you have?

When that business fails, would you stand up again and start all over? When you family doubts you and the pressure to provide hits you, will you continue to stand by your dream? People want the glory without the trials and training. Just take a look at the infographic below that I found:

33Source: Anna Vital (Founders & Founders)

I also came across this interesting quote, which I thought was very useful in clarifying what we really value. Millionaires invest their money and make investing a priority, while poor people spend their money first and make spending a priority.

5Source: Gecko and Fly

Always, always seek to make investing your primary objective. Invest your time, invest your money, invest in your team if you are running a business. Invest, invest and invest.

Is investing your primary objective, or is spending your primary objective? Would you be willing to delay gratification, in order to enjoy a lot more in the future, far more than you can ever imagine?

  • Do not quit. Ensure that you have made a commitment. Tell your friends, and engage people to keep you on this path.
  • Invest your money, your time, and in your team. Investing is what multiplies your returns in the long-run. Keep at it!
  • Prioritize learning, rather than earning. It pays to be more proficient at what you want to do. When you are starting out, make learning a priority, and the profits will come eventually.

Don’t give up on your dreams!

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Feel free to share this with people you know who are working hard toward their dreams, and striving to build their first pot of Gold. And with these 5 actionable steps, you’ll be one step closer to your first million! 😀

Bonus: Download free ebook: The 7 Best-Kept Secrets of Professional Traders

RESEARCH SOURCES & REFERENCES

vulcanpost.com/593788/in-forbes-2016-asias-richest-families-list-we-see-some-prominent-singaporean-names
businessinsider.sg/habits-of-self-made-millionaires-2016-3/#rJDS8hCPPhHm5qpK.97
fastcompany.com/3052770/how-to-be-a-success-at-everything/7-habits-of-self-made-millionaires
allbusiness.com/slideshow/9-smart-habits-of-real-millionaire-entrepreneurs-16769866-1.html
huffingtonpost.com/timothy-sykes/top-30-millionaire-habits_b_8260134.html